European Law (UK)

EU law

S. HarrisM. Horspool

This subject guide was prepared for the University of London International Programmes by:

u Siri Harris, BA, LLM, LLM, Senior Lecturer in Law, Kingston University.

and

u Margot Horspool, LLM, Emeritus Professor in European and Comparative Law, University of Surrey; Professorial Fellow, British Institute of International and Comparative law, London; visiting Professor Queen Mary University, London.

Acknowledgments

The authors would like to thank Clare Williams, LLM, for all her help in preparing this guide.

This is one of a series of subject guides published by the University. We regret that owing to pressure of work the authors are unable to enter into any correspondence relating to, or arising from, the guide. If you have any comments on this subject guide, favourable or unfavourable, please use the form at the back of this guide.

Publications Office University of London International Programmes Stewart House 32 Russell Square London WC1B 5DN United Kingdom

www.londoninternational.ac.uk

Published by the University of London Press © University of London 2011. Printed by Central Printing Service, University of London

The University of London does not assert copyright over any readings reproduced in this publication. However, a separate copyright vests in the format of this work as a published edition and database rights may exist in its compilation. This copyright and any such database rights belong to the University of London, as does copyright in the main text. All rights reserved. No part of this work may be reproduced in any form, or by any means, without permission in writing from the publisher.

SG10_EU Law_BOOK.indb 2 19/08/2010 13:48:15

EU law page i

Contents

1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

1.1 Using the subject guide . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

1.2 Readings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

1.3 The examination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

1.4 Terminology and abbreviations . . . . . . . . . . . . . . . . . . . . . . . . 9

2 The Treaties and their significance . . . . . . . . . . . . . . . . . . . 11

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12

2.1 Background to the establishment of the European Economic Community (EEC) . . . . . . . . . . . . . . . . . . . .13

2.2 The European Economic Community established by the Treaty of Rome 1957 . . . . . . . . . . . . . . . . . . . . . . . . . . .15

2.3 The development of the EU legal order in subsequent treaties . . . . . . . .17

2.4 Establishment of the European Union . . . . . . . . . . . . . . . . . . . . .21

Reflect and review. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29

3 The institutions of the European Union . . . . . . . . . . . . . . . . . 31

Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32

3.1 The merging of the original institutions . . . . . . . . . . . . . . . . . . . .33

3.2 The European Council . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34

3.3 The European Parliament (EP) . . . . . . . . . . . . . . . . . . . . . . . . .35

3.4 The Commission. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39

3.5 The Council of the EU . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43

3.6 The Court of Justice of the European Union (comprising the Court of Justice, the General Court and specialised courts) . . . . . . . .48

3.7 The Court of Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51

3.8 The European Central Bank (ECB) . . . . . . . . . . . . . . . . . . . . . . .52

3.9 Advisory bodies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53


4 Sources of Union law, legislative acts and procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .62

4.1 Sources of law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .63

4.2 Legislative procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . .66


5 The general principles of EU Law . . . . . . . . . . . . . . . . . . . . 75

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .76

5.1 The initial absence of fundamental rights . . . . . . . . . . . . . . . . . . .78

5.2 The application of the general principles . . . . . . . . . . . . . . . . . . .81


page ii University of London International Programmes

6 Union law and national law . . . . . . . . . . . . . . . . . . . . . . . 89

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .90

6.1 The doctrine of direct effect . . . . . . . . . . . . . . . . . . . . . . . . .91

6.2 Indirect effect of Directives . . . . . . . . . . . . . . . . . . . . . . . . . .96

6.3 Remedies for Union law rights . . . . . . . . . . . . . . . . . . . . . . . .98

6.4 Action for damages against a Member State for breach of Union law . . . . 100

6.5 The supremacy of EU law . . . . . . . . . . . . . . . . . . . . . . . . . . 103

6.6 EU law from the Member States’ perspective . . . . . . . . . . . . . . . . 104

Reflect and review. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110

7 Article 267 TFEU The preliminary ruling jurisdiction . . . . . . . . . . 111

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112

7.1 References by national courts for preliminary rulings . . . . . . . . . . . . 113

7.2 The discretionary reference . . . . . . . . . . . . . . . . . . . . . . . . . 115

7.3 The compulsory reference . . . . . . . . . . . . . . . . . . . . . . . . . 116

7.4 Other aspects of the Article 267 TFEU jurisdiction . . . . . . . . . . . . . . 120


8 Article 258 TFEU Enforcement actions . . . . . . . . . . . . . . . . . . 125

Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126

8.1 Direct actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127

8.2 Article 258 TFEU enforcement action . . . . . . . . . . . . . . . . . . . . 127

8.3 Defences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131

8.4 Enforcement: Article 260 TFEU . . . . . . . . . . . . . . . . . . . . . . . . 134


9 Judicial review and the action for damages against Union institutions . . . . . . . . . . . . . . . . . . . . . . . . 139

Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140

9.1 Judicial review Article 263 TFEU . . . . . . . . . . . . . . . . . . . . . . . 141

9.2 Who can attack (who has locus standi or standing)? . . . . . . . . . . . . . 143

9.3 Direct concern . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153

9.4 Other elements of an Article 263 TFEU action . . . . . . . . . . . . . . . . 154

9.5 Action for failure to act, Article 265 TFEU (ex Article 232 EC) . . . . . . . . . 154

9.6 Indirect challenge to the legality of Union measures, Article 277 TFEU (ex Article 241 EC) . . . . . . . . . . . . . . . . . . . . . 155

9.7 Action for damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155


10 Free movement of goods . . . . . . . . . . . . . . . . . . . . . . . . 163

Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164

10.1 The legal basis of the single market . . . . . . . . . . . . . . . . . . . . . 165

10.2 Tariff barriers to trade within the EU . . . . . . . . . . . . . . . . . . . . . 167

10.3 Article 110 TFEU (ex Article 90 EC) discriminatory taxation . . . . . . . . . . 170

10.4 Articles 34–36 TFEU (ex Articles 28–30 EC) quantitative restrictions . . . . . 174

10.5 Harmonisation measures under Article 114 TFEU (ex Article 95 EC). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189


EU law page iii

11 Competition policy . . . . . . . . . . . . . . . . . . . . . . . . . . . 195

Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 196

11.1 A note on enforcement procedure up to 1 May 2004 . . . . . . . . . . . . 197

11.2 Article 101 TFEU (ex Article 81 EC) . . . . . . . . . . . . . . . . . . . . . . 198

11.3 Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211

11.4 Article 102 TFEU (ex Article 82 EC) . . . . . . . . . . . . . . . . . . . . . . 215


12 Free movement of persons . . . . . . . . . . . . . . . . . . . . . . . 229

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 230

12.1 Scope of the rights to free movement . . . . . . . . . . . . . . . . . . . . 231

12.2 Nationality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 233

12.3 Equal treatment for workers and their families . . . . . . . . . . . . . . . 235

12.4 Grounds for refusal of entry or residence . . . . . . . . . . . . . . . . . . 243

12.5 Rights of free movement for non-economically active persons . . . . . . . 246

12.6 A purely internal situation . . . . . . . . . . . . . . . . . . . . . . . . . 250

12.7 Directive 2004/38 on rights of Union citizens and their families . . . . . . . 253


13 Establishment and services . . . . . . . . . . . . . . . . . . . . . . . 263

Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 264

13.1 The distinction between services and establishment . . . . . . . . . . . . 265

13.2 Establishment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 266

13.3 Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 279


14 Freedom from discrimination . . . . . . . . . . . . . . . . . . . . . . 293

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 294

14.1 Article 157 TFEU (ex Article 141 EC) – equal pay for equal work . . . . . . . 295

14.2 Equal treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 303

14.3 The general principle of non-discrimination . . . . . . . . . . . . . . . . 308


Feedback to activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . 315

Appendix 1: Table of equivalent Article numbers. . . . . . . . . . . . . . 343

page iv University of London International Programmes

Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

1.1 Using the subject guide . . . . . . . . . . . . . . . . . . . . . . . . . . 3

1.2 Readings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

1.3 The examination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

1.4 Terminology and abbreviations . . . . . . . . . . . . . . . . . . . . . . 9

1 Introduction

page 2 University of London International Programmes

Introduction

The European Union (EU) today encompasses 27 countries with a combined population of nearly half a billion people. Within the boundaries of the European Union, an internal market has been established. All trading barriers between the participating Member States have been abolished and the entire area comprises an internal market for goods and services and, within most of the area, for workers, self-employed persons and companies.† A single set of trade rules applies across the EU and there is a Common Customs Tariff wherever goods from countries outside the EU enter its borders. It is the largest trading block in the world, with the world’s greatest overall GDP (one quarter of the global total).

The European Economic Community (EEC) was created by the Treaty of Rome in 1957 with the aim of fostering economic growth and increased productivity among the six participating Member States (France, Germany, Italy, Belgium, the Netherlands and Luxembourg† – the UK was not one of the founder members but joined in 1973) and these figures reflect the success of this enterprise. The EEC itself built on the success of the earlier European Coal and Steel Community (ECSC) which had been established among the same six countries. The impetus behind this earlier Community had been to prevent another war in Europe by placing the production of coal and steel, the materials of war, under common control. The participating Member States, including the ancient enemies, France and Germany, signed the Treaty of Paris† in 1951, which established the ECSC and created a common market in coal and steel. Conflict in Europe ignited the two world wars of the twentieth century, but in 2005, as well as celebrating the sixtieth anniversary of the end of the Second World War, Europe could also celebrate ‘the longest period of peace Western Europe has ever known’.† This may also be attributed to a large extent to the success of the European Union.

The European Economic Community was renamed the European Community in 1993, reflecting the development of aims and competences which were not purely economic but which increasingly reached into a wider social and even political sphere. In 1993, the broader European Union was founded on the European Community (see Chapter 2 for details) and this Union expanded cooperation between the Member States beyond the areas covered by the Treaty of Rome and into foreign policy, defence, policing and judicial cooperation. This further cooperation is governed by the other parts of the European Union Treaty, consideration of which is largely beyond the scope of this course.

EU law is supreme over UK law (see Chapter 6). Where there is conflict between national law and EU law, EU law prevails and national law must be disapplied. The judgments of the European Court of Justice are now the ultimate authority in the judicial hierarchy of the UK. The role that EU law plays in the national legal systems is increasingly important.

There can be no question that the economic and social landscape of modern Europe has been shaped by the law which flows from the European Community Treaty, the Treaty of Rome. It is this law which you will study on this course. It is fast-changing, with the case law of the Court of Justice of the European Union playing a very important role. The institutions and methodology of law-making in the EU are unfamiliar and will require careful attention in the early stages of the course, but it is a subject where slowly the overall structure becomes clear. You are studying the emergence and development of ‘a new legal order’ which is still changing; many of the most important cases are recent and this makes EU law interesting, dynamic and relevant. The impact of EU law on many aspects of life in the United Kingdom and in the other Member States is significant and growing.

The Lisbon Treaty

The coming into force of the Treaty of Lisbon on 1 December 2009 ended a long period of uncertainty which started with the rejection of the previous attempt, the Draft Treaty Establishing a Constitution for Europe (see Chapter 2 for more details).

We hope you will enjoy the course!

† There are some restrictions on free movement of workers from the new Member States which acceded to the Union in 2004 and 2007.

† Belgium, the Netherlands and Luxembourg are often referred to collectively as the ‘Benelux countries’.

† The Treaty of Paris was for 50 years duration. It came into force in 1952 and therefore terminated in 2002 when its functions were taken over by the EC.

† Speech 9 May 2005 by EU External Relations Commissioner Benita Ferrero-Waldner.

EU Law 1 Introduction page 3

Learning outcomesBy the end of this chapter you should be able to:

explain the main topics in the EU law syllabus

understand how the subject guide develops the topic of EU law

identify the key textbooks and readings that will be used.

1.1 Using the subject guide

The subject guide has been specially written for you by experts who lecture and examine in the subject. It covers the entire syllabus.

The subject guide will tell you which parts of the textbooks to read – and when to do so. It is vital that you do the ‘Essential reading’ when indicated within the guide. It also contains a number of activities and sample examination questions to help you improve your skills.

These exercises have been designed to help you understand and remember the key points in EU law. It is very important that you do them. Answer the activities in your own words before you look at the feedback. If the feedback shows that you did not really understand the topic, you should work through those sections of the subject guide again.

Please read carefully the note about Treaty Article numbers in Section 1.2 Readings, below.

1.1.1 Chapters of the guideThe guide contains the following chapters:

Chapter 2 The Treaties and their significanceChapter 2 provides a historical overview of the foundation and development of the European Union, from the establishment of the European Economic Community (EEC) in 1957 to the present European Union (EU) of 27 Member States. The chapter includes a summary of the reasons behind the decision to establish the EEC in 1957 and gives insight into the unique nature of the EU as a law making entity, with competence to create supra-national law binding the participating Member States.

The effect of each of the treaties which have expanded the legal powers and altered the institutional structure of the EU since 1957 is outlined, with particular reference to the increasing competences of the EU, the introduction of new legislative procedures and the developing role and significance of the European Parliament.

Chapter 3 The institutions of the European UnionThis chapter contains an account of the main features of the institutions of the EU, with reference to their composition, functions and powers, and the overall institutional balance is explained. The chapter gives a historical perspective on developments in the institutional structure since 1957.

Chapter 4 Sources of Union law, legislative acts and procedures This chapter describes and explains the primary and secondary sources of law of the European Union. It gives an account of the various legislative procedures used to create law.

Chapter 5 The general principles of EU lawOne of the important sources of EU law is the ‘General Principles’ of law. These General Principles, which include fundamental human rights, have been developed by the European Court of Justice (ECJ): the Court has incorporated them into the EU legal order in a series of judgments starting in 1969. The General Principles bind the EU institutions when acting or when making law and also bind the Member States when they give effect to, or derogate from EU law.


The original Treaty of Rome did not contain any fundamental rights. The development of such rights by the Court is a highly significant feature of the European Union legal order. The chapter traces the development of such rights by the Court of Justice of the European Union as well as explaining the sources from which the Court of Justice derives the General Principles.

Although the source of human rights in the EU remains the case law of the Court of Justice, references to rights were incorporated in later treaties. These institutional developments and the creation of the Charter of Fundamental Rights and Freedoms of the EU are also described.

Chapter 6 Union law and national law This chapter provides an essential basis for understanding the application and enforcement of EU law in the Member States. It explains the relationship between national law and EU law (EU law is supreme over all national law) and describes and analyses the legal principles, direct effect, indirect effect and state liability developed by the Court of Justice to facilitate the enforcement of EU law rights by individuals in national courts, even when the Member State has failed to incorporate or transcribe the relevant EU law provisions.

Chapter 7 Article 267 TFEU The preliminary ruling jurisdiction A very important feature in the EU legal order is the capacity of national courts to send Article 267 TFEU references to the Court of Justice. These references are sent when a case before the national court raises a question of EU law; the national court can then refer that question to be considered by the Court. The Court of Justice rules on the point of EU law only (it may not rule on issues of national law), and its ruling must then be applied to the facts of the case by the national court. Where a case is brought before a national court from which there is no further appeal, that court is bound by the terms of Article 267(3) TFEU to make a reference; however, the Court of Justice has created possible exceptions to this obligation.

The law governing the reference procedure and preliminary rulings is described and explained in this chapter.

Chapter 8 Article 258 TFEU Enforcement actions The mechanism contained in the original Treaty of Rome to ensure that Member States would comply with their EU law obligations was Article 258 TFEU, whereby the European Commission was empowered to take action against a Member State in breach of its Union law obligations. The action begins with dialogue and negotiation; however, where no resolution is reached the Commission has power to bring the Member State before the Court of Justice for a Declaration that the Member State is in breach of EU law. Article 259 TFEU provides a similar, but rarely used, action between Member States.

Due to a marked failure of Member States to comply with Article 258 Declarations of the Court of Justice, a new action was introduced by the TEU, whereby the Commission could bring a further action against a Member State which had failed to comply with the earlier Article 258 TFEU judgment: Article 260 TFEU. Under new powers added to Article 260 TFEU, following a similar procedure of negotiation, a defaulting Member State can now be brought by the Commission before the Court of Justice and substantial fines imposed by the Court.

Chapter 9 Judicial review and the action for damages against Union institutionsArticle 263 TFEU allows judicial review of the acts of the EU institutions which have legal effects. Such review procedures are held directly before the General Court of the European Union and the Court of Justice of the European Union. Although there is unrestricted access to judicial review for the Commission, Council, European Parliament and Member States, the rules on locus standi for individuals are extremely restrictive except where there is a decision addressed directly to that person or legal person.


This chapter considers the action for judicial review under Article 263 TFEU as well as briefly describing actions under Article 265 TFEU (action for failure to act) and Article 277 TFEU, the indirect action.

Article 340 TFEU, the action for damages against the Union institutions and their servants, is also described.

Chapter 10 Free movement of goodsThe free movement of goods (FMG) is one of the four freedoms guaranteed by the Treaty of Rome and is the cornerstone of the internal market. The treaty prohibits customs duties and charges having equivalent effect to customs duties (Articles 28–30 TFEU), discriminatory taxation (Article 110 TFEU), quantitative restrictions (quotas) and measures having equivalent effect to quantitative restrictions (Articles 34–36 TFEU). Judgments of the Court of Justice have defined the ambit of these provisions and this chapter examines the extensive case law on FMG.

Chapter 11 Competition policyCompetition law in the EU is highly developed and is targeted at anti-competitive behaviour by undertakings (the course does not cover state aids). There are two Articles which give effect to competition policy, Article 101 TFEU, which prohibits collusion by undertakings which distort or restrict competition in the EU, and Article 102 TFEU, which prohibits the abuse of a dominant position by undertaking(s) which have significant market power. In both cases there is a requirement that the prohibited behaviour should affect trade between Member States. The chapter examines the case law and secondary legislation governing this area and explains how the competition provisions are enforced.

Chapter 12 Free movement of personsThis chapter covers the case law and legislation on free movement of persons in the EU (excluding the rights given under freedom of establishment and free movement of services, see Chapter 13). The free movement of persons, starting with free movement of workers (Article 45 TFEU), another of the fundamental freedoms established by the internal market, has been the central focus of this area for many years but now ‘Citizenship’ of the EU, introduced by the Maastricht TEU and now Part Two of the TFEU, has become an important basis for case law of the Court of Justice and of secondary legislation; these developments have significantly extended the rights of non-economically active EU citizens and their families.

Chapter 13 Establishment and servicesThe Treaty of Rome guarantees the right to provide services into other Member States (Article 56 TFEU) and the right for EU citizens to establish themselves as self-employed persons in other Member States (Article 49 TFEU) with their families (Directive 2004/38). The right of establishment includes the right to mutual recognition of qualifications in the EU for EU citizens. The legal rights created by the law deriving from Article 49 TFEU also apply to legal persons (companies).

Chapter 13 looks at the extensive case law and secondary legislation based on these two provisions.

Chapter 14 Freedom from discriminationFrom its inception, the EEC required that pay for men and women should be equal (Article 157 TFEU). Subsequent secondary legislation has made the principle of equal treatment in the work place mandatory throughout the EU and has given people other important protections. The case law of the Court of Justice extended the prohibition of discrimination in pay based on gender to catch indirect discrimination including, for example, discrimination against part-time workers (always predominantly women). One of the General Principles discussed in Chapter 5 is the principle of Equality or Non-discrimination. The Treaty of Amsterdam developed the law in this area further by inserting Article 19 TFEU Treaty, which gives competence to the EU to legislate to prohibit discrimination on the grounds of sex, racial or ethnic origin, religion or belief, disability, age or sexual orientation. Chapter 14 describes and explains this law.


1.1.2 Other skillsAmong the skills you are required to develop as part of your LLB studies, are the use of IT in legal research and the practice of verbal skills. You should:

use the internet to find out more about key topics, and to read and research cases and issues

spend time developing verbal presentations of topics. You can practise verbal delivery either by yourself or with groups of friends and family.

1.2 Readings

Legislation and judicial decisions

The main primary legislative text to which you will refer is the consolidated version of the Treaty of Rome, the Treaty establishing the European Community (contained in your copy of EU legislation). The original Treaty of Rome has subsequently been amended by:

the Single European Act (SEA)

the Treaty on European Union (TEU) known as the Maastricht Treaty

the Amsterdam Treaty (ToA)

the Treaty of Nice (ToN)

the Treaty of Lisbon (ToL).

These Treaties are important because of the number of changes they made to the Treaty of Rome. The Treaty numbers have changed several times, so the numbers in this subject guide relate to the Lisbon Treaty with, where appropriate, the numbers since the Treaty of Amsterdam (themselves already changed from previous numbers) in brackets. That is why in cases and developments before the ToA you will find Articles referred to by different numbers, but the Lisbon Treaty Article numbers will always be cited as well. Likewise, you should always cite the Treaty of Lisbon numbers in examination answers.

NB A table of equivalent article numbers is provided at the back of this guide (Appendix 1) for reference.

There is a substantial amount of secondary legislation which you will study, together with the principal judgments of the Court of Justice and the General Court of the European Union.

Legal documents and statute books

The best compilation of legislation is:

Foster, N. (ed.) Blackstone’s EU treaties and legislation 2010/2011. (Oxford: Oxford University Press, 2010) [ISBN 9780199569168].

You should purchase this book as you may take a copy of it into the examination with you. It is essential. Check in your copy of the Regulations to see which other statute books you may take into the exam.

Textbooks

The textbook by Margot Horspool and Matthew Humphreys is:

Horspool, M. and M. Humphreys European Union law. (Oxford: Oxford University Press, 2010) sixth edition [ISBN 9780199575343].

An alternative textbook is:

Steiner, J. and L. Woods EU law. (Oxford: Oxford University Press, 2009) tenth edition [ISBN 9780199219070].


These books should be used in conjunction with a case-book. A good case-book is:

Weatherill, S. Cases and materials on EU law. (Oxford: Oxford University Press, 2010) ninth edition [ISBN 9780199214013].

A comprehensive textbook, which includes cases and materials, is:

Craig, P. and G. De Búrca EU law text, cases and materials. (Oxford: Clarendon Press, 2007) fourth edition [ISBN 9780199273898]. There is a new edition, including the Lisbon Treaty, due to be published in 2011.

Throughout this guide we refer to these textbooks in abbreviated form, such as:Horspool and Humphreys, Chapter 12, ‘Citizenship’, sections xx–xx, pp.xx–xx.

We have set out the reading in the chapters which follow for Horspool and Humphreys, and Craig and de Búrca. You are not required to read the same material in each of the recommended texts. There are also alternative books available. A concise textbook is:

Foster, N. EU law directions (Oxford: Oxford University Press, 2010) second edition [ISBN 9780199581597].

Useful further reading

You may wish to refer to the following books if you want to explore a particular subject in more depth.

Arnull, A., A. Dashwood, M.G. Ross, M. Dougan, M. Ross, E. Spaventa and D, Wyatt Wyatt and Dashwood’s European Union law. (London: Sweet and Maxwell, 2006) fifth edition [ISBN 9780421925601]. Please note, a sixth edition of this book is due to be published in 2010/11.

Arnhull, A. The European Union and its Court of Justice. (Oxford: Oxford University Press, 2006) second edition [ISBN 9780199258857].

On EU constitutional and administrative lawAn excellent book in this area is:

Hartley, T.C. The foundations of European Union law (Oxford: Oxford University Press, 2010) seventh edition [ISBN 9780199566754].

On substantive law Barnard, C. The substantive law of the EU, the four freedoms (Oxford: Oxford

University Press, 2010) third edition [ISBN 9780199562244].

On competitionThe best standard textbooks on this area are:

Whish, R. Competition law. (London: Butterworths, 2008) sixth edition [ISBN 9780199289387].

Korah, V. An introductory guide to EC competition law and practice. (Oxford: Hart Publishing, 2007) ninth edition [ISBN 9781841137544].

Korah, V. Cases and materials on EC competition law. (Oxford: Hart Publishing, 2006) third edition [ISBN 9781841136448].

Periodicals (journals)

The principal English language journals that publish articles on EU law are:

Common Market Law Review (CMLRev)

European Law Journal (ELJ)

European Law Review (ELRev)

International and Comparative Law Quarterly (ICLQ)

Journal of Common Market Studies (JCMS)


Legal Issues of Economic Integration (LIEI)

Modern Law Review (MLRev)

Yearbook of European Law (YEL).

The abbreviations given in parentheses will be used throughout this guide for references to these journals. You are also strongly encouraged to develop the habit of reading a quality newspaper every day: the best regular source of information on EU law is the Financial Times.

Useful websites

Court of Justice of the European Union: http://curia.europa.eu/

European Parliament: www.europarl.eu.int

Council of the European Union: http://ue.eu.int

European Commission: http://ec.europa.eu/

Commission Competition Directorate website: http://ec.europa.eu/competition/index_en.html

European Research Papers Archive (ERPA): http://eiop.or.at/erpa/

Case citation

Decisions of the Court of Justice and General Court are identified by a number, unique to the case. This makes them very easy to look up in a textbook.

Case numbers have two parts, the second of which reflects the year in which the case was registered at the Court. Sometimes several cases are heard together. Cases have a letter C or T in front of the number, C for cases decided by the Court of Justice and T for those decided by the General Court. Cases before the Court of Justice have the page number preceded by a Roman I and those before the General Court a Roman II (for example Case C-262/88 Barber v Guardian Royal Exchange [1990] ECR I-1889).

Case references will usually be to the ECR (European Court Reports: the official reports of the Court of Justice) or CMLR (Common Market Law Reports). If the case is available in transcript only, it is usual to cite the date of the judgment.

In the exam, you are not expected to cite the number or the full name of the case. A shortened form of the name is sufficient, such as van Gend en Loos.

All cases of the European Courts are available on the ‘curia’ website which has a very easy search form: http://curia.europa.eu/jurisp/cgi-bin/form.pl?lang=en

You can also access European cases through the Online Library at www.external.shl.lon.ac.uk/index.asp?id=law

Online Library and Virtual Learning Environment (VLE)

As mentioned above, you can access European cases through the Online Library. This will also give you access to many useful journals and other legal databases. You should get used to using it regularly.

You should also regularly refer to the EU law section of the Laws VLE. You will find a number of helpful resources, including all of the study pack readings and updates to the subject guide.

1.3 The examination

Important: the information and advice given in this section is based on the examination structure used at the time this guide was written. However, the University can alter the format, style or requirements of an examination paper without notice. Because of this, we strongly advise you to check the instructions on the paper you actually sit.


Assessment for this subject is by means of a three-hour examination. You will be required to answer four out of a total of eight questions.

Always answer four questions and try to spend the same amount of time on each. A student who produces three first class answers (no easy task!) will end up with an overall low 2.2. Write clearly. You may lose marks for an illegible answer and bad handwriting makes it difficult for the examiner to follow your argument. It is worthwhile spending a few minutes writing a short plan of your answer so that it is structured and clear. Do try to structure your answers, with a clear introduction and conclusion. In a problem question, try to be methodical, addressing one issue after another.

1.4 Terminology and abbreviations

AJCL American Journal of Comparative Law

CAP Common Agricultural Policy

CCT Common Customs Tariff

CFI Court of First Instance

CFSP Common Foreign and Security Policy

Commission European Commission

COREPER Committee of Permanent Representatives (French acronym)

EAEC European Atomic Energy Community

EBLR European Business Law Review

EC European Community (EEC is correct only pre-1 November 1993)

EC Treaty Treaty of Rome

ECB European Central Bank

ECtHR European Court of Human Rights

ECHR European Convention on Human Rights

ECJ European Court of Justice

ECOSOC Economic and Social Committee

ECSC European Coal and Steel Community

EEA European Economic Area

EFTA European Free Trade Association

EMS European Monetary System

EP European Parliament

ERM Exchange Rate Mechanism

EU European Union

Euratom European Atomic Energy Community

GATT General Agreement on Tariffs and Trade

ICL International and Comparative Law Quarterly

ILJ Industrial Law Journals

IRLR Industrial Relations Law Reports

LIEI Legal Issues of Economic Integration

LQR Law Quarterly Review

MEQR Measure equivalent to a quantitative restriction


nyr not yet reported

OJ Eng. Sp. Ed Official Journal of the EC, English Special Edition (pre-1973)

PL Public Law

QMV Qualified Majority Vote

SEA Single European Act

ToA Treaty of Amsterdam

ToL Treaty of Lisbon

ToN Treaty of Nice

TEU Treaty on European Union/Maastricht Treaty

TFEU Treaty on the Functioning of the European Union

WTO World Trade Organisation

YEL Yearbook of European Law

2 The Treaties and their significance

Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12

2.1 Background to the establishment of the European Economic Community (EEC) . . . . . . . . . . . . . . . . . . .13

2.2 The European Economic Community established by the Treaty of Rome 1957 . . . . . . . . . . . . . . . . . . . . . . . .15

2.3 The development of the EU legal order in subsequent treaties . . . . . . .17

2.4 Establishment of the European Union . . . . . . . . . . . . . . . . . . .21

Reflect and review . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29


Introduction

This chapter introduces you to the legal order of the European Union. The European Union itself was created by the Treaty on European Union (TEU, the Maastricht Treaty) in 1993 and included, apart from the European Community, two additional areas of cooperation between the Member States described briefly later in this chapter.

The legal system of the European Union has been described as ‘a new legal order’ and ‘sui generis’ by the Court of Justice, meaning that it is ‘of its own, unique type’, unlike any other legal system in the world.

The Member States (now 27 of them) belong to a supranational organisation governed by institutions to which the Member States have transferred certain powers and to which they have also given competence to enact legislation (within limited areas) which binds those signatory states.

The European Economic Community (later called the European Community) was established by the Treaty of Rome in 1957 (the EEC Treaty). The background to the creation of the European Economic Community (EEC) is described and the essential features of the common market which it created and which is now called the internal market are briefly explained. These are then described and analysed in detail in subsequent chapters. The effectiveness of European Union law has been greatly increased by the case law of the Court of Justice, the main court of the European legal order and one of the original Community institutions, initially established by the ECSC Treaty of Paris in 1951 and subsequently included in the Treaty of Rome. In its early case law, the Court of Justice created two principles of fundamental importance to the Community legal order, which are essential to the effectiveness of Union law. These are the twin principles of ‘direct effect’ established in Case 26/62 van Gend en Loos v Nederlandse Administratie der Belastingen [1963] ECR 1 and supremacy of Union law, laid down in Case 6/64 Costa v ENEL [1964] ECR 585. These principles are explored in depth in Chapter 6. Finally, this chapter provides you with an outline of the changes to the Treaty of Rome (the EEC Treaty) and to the European Union legal order introduced by subsequent treaties. This is intended as an initial guide for you, but also as a point of reference for your later studies. Developments of particular significance are highlighted; on this course you are not expected to know all the changes introduced by later Treaties in detail.

In effect, this chapter is intended to provide you with a map which will help you to find your way round European Union law. Because everything in European Union law is quite unfamiliar – the institutions, the forms of primary and secondary legislation, the structure of the Treaties – this can be a difficult subject to study at the beginning. However, you will find it quickly becomes clearer as you progress through the different areas.

The first part of the course covers the institutional and constitutional law (Chapters 1–9) whereas the second part deals with the substantive law, the four freedoms, competition and discrimination. The last section of this chapter gives some general guidance on studying EU law with reading lists and information about other sources of law which you will find helpful.

Learning outcomes By the end of this chapter and the relevant readings, you should be able to:

list the six founding Member States of the EEC

explain what the ECSC and Euratom are

state what the Council of Europe, the European Convention on Human Rights and Freedoms (ECHR) and the European Court of Human Rights are

explain why the ECHR and the European Court of Human Rights are not part of the European Union

identify the essential elements that create a common market

identify the four original Institutions of the EEC and the institutions that have been added since

EU Law 2 The Treaties and their significance page 13

state when the EEC became the EC, and then the EU

describe the original three-pillar structure of the European Union

explain what is meant by the principle of ‘dual vigilance’

describe the ‘teleological’ approach of the Court of Justice

describe the benefits of a common or internal market and give a general account of what gives rise to these benefits

state the essential features of the EEC created by the Treaty of Rome

explain the original relationship between the European Community and the European Union

explain what is meant by a qualified majority vote (QMV) in the context of Community law and why it was thought necessary to move from voting by unanimity to voting by qualified majority.

explain the developments brought about by the Treaty of Lisbon.

2.1 Background to the establishment of the European Economic Community (EEC)

Essential reading Horspool and Humphreys, Chapter 2: ‘The constitutional base of the Union’,

sections 2.1–2.3, pp.11–13.

Craig and de Búrca, Chapter 1: ‘The development of European integration’, pp.1–10.

The European Economic Community was established by the Treaty of Rome in 1957 with the aim of establishing a common market within the signatory states. The establishment of the EEC was a momentous and historic step in the process of the integration of Europe, the final outcome of which is still to be determined. It must be remembered that the EEC was established in the aftermath of the devastation caused by the Second World War when the economies of the nation states of Europe lay in ruins.

Origins: common market in coal and steel

The first step towards integration in Europe was taken by the French Foreign Minister, Robert Schuman, who promoted the plan put forward by Jean Monnet, a French businessman turned administrator. Jean Monnet was a committed federalist who suggested putting coal and steel resources – in particular, those of France and Germany – under common ownership and control. Other countries were invited to join. It was intended that placing these raw materials, which were at the time the main ones used in the production of weapons, under common ownership would make it impossible for another World War to start in Europe.

Rivalry over the coal and steel producing areas of Europe, mainly the Ruhr and the Saar, but also areas in the four other countries, would be contained and French fear of Germany would be neutralised. It was intended that the nations of Europe, France and Germany in particular would be bound together in peaceful, economic cooperation.

The first step towards cooperation and integration took place in 1951 with the signing of the Treaty of Paris by the six founding Member States of the European Communities: Germany, Italy, France and the Benelux countries (Belgium, the Netherlands and Luxembourg). This Treaty created the ECSC, the European Coal and Steel Community, which set out to create a common market in coal and steel.

The significance of the ECSC is that it created supranational institutions, the High Authority, an Assembly, a Council and a Court with powers over the signatory states. It represented an important first step in the integration of Europe. The UK objected to the supranational element with its implications for national sovereignty, and refused to join. Attempts by the same six countries (with the United Kingdom again not taking part) to create a European Defence Community with a common army led to the signing of the


European Defence Community Treaty in 1952, but it foundered on French objections. The plan at that time to set up a common army – which also required a common foreign policy – was over-ambitious and the whole initiative finally came to nothing.

Euratom

However, the six Member States met in Messina in Italy in 1955 and an intergovernmental committee chaired by the Belgian Prime Minister, Paul-Henri Spaak, was set up. This published a report, called the Spaak report, which set out the plan for two further communities, the European Atomic Energy Community, Euratom, and the European Economic Community. Euratom was to place the development of nuclear energy for peaceful purposes under common control of the Member States but it was the establishment of the EEC, setting up a common market among the signatory states, which is of central significance.

The Council of Europe

Note that in 1949 the Council of Europe had been established. This is an entirely separate organisation from the European Community. It is an international organisation based in Strasbourg which aims to strengthen democracy, human rights and the rule of law; it is responsible for the European Convention on Human Rights and Freedoms (ECHR) which was drawn up in 1950 and was ratified in 1953. It allows individuals from signatory countries who have exhausted their domestic remedies to bring actions in the European Court of Human Rights in Strasbourg (ECtHR), enforcing their human rights protected by the Convention. The Council of Europe and the European Court of Human Rights are institutionally entirely separate from the institutions and Court of Justice of the EU. However, Article 6(2) of the Lisbon TEU now provides that the EU will accede to the ECHR. This will happen in the future, but it is as yet unclear when this is likely to be achieved.

Self-assessment questions 1. Write down the names of the six founding Member States.

2. Write down the names of the three European Communities, stating which Treaty established each one and its date.

3. What were the ECSC and Euratom created to achieve?

4. State what was the underlying reason for establishing the ECSC.

5. State which two individuals are credited with creating the impetus towards an integrated Europe.

6. What is the purpose of the Council of Europe?

7. Explain what the European Convention on Human Rights and Freedoms (ECHR) is.

8. Explain why the European Court of Human Rights and the ECHR are separate from the European Union.

Summary After the Second World War, the economies of the nation states of Europe were in ruins. There was an overwhelming need to rebuild the economic viability of the countries of Europe, to ensure autonomy in food supply, and to ensure that another World War could never break out because of conflict between Germany and France. To achieve the latter, six countries signed the Treaty of Paris in 1951 to place coal and steel under common ownership and control and then to establish a ‘common market’ within their borders and to create a common agricultural policy. This Treaty also established the European Atomic Energy Community, or Euratom, for the six countries to jointly develop nuclear power. The European Coal and Steel Community (ECSC), Euratom and the European Economic Community (EEC) created by these treaties established institutions with supranational powers, the first step in the integration of Europe.


2.2 The European Economic Community established by the Treaty of Rome 1957

Essential reading You should read at least one of the following:

Horspool and Humphreys, Chapter 2: ‘The constitutional base of the Union’, sections 2.1–2.3, pp.11–13; Chapter 12: ‘Citizenship’, section 12.4, pp.292–293.


The Treaty of Rome establishing the EEC was signed on 25 March 1957 with the aim of establishing a common market within the signatory states.

The aims of the Treaty of Rome were strongly economic in nature. In the aftermath of the war, the economic reconstruction of Europe was an overwhelming necessity. The economies of the nation states of Europe were devastated by the Second World War and the creation of a common market was perceived as a way to rebuild these economies and to make Europe economically independent of America; at that time Europe was dependent on American aid delivered through the Marshall Plan. The purpose of establishing a common market was to increase wealth, growth and productivity in Europe. After the war, experience of major food shortages, which had led to immense suffering by the population of occupied countries, it was also clearly necessary to establish a common policy for agricultural production in particular.

2.2.1 What is an internal market? An internal market is a form of economic integration between participating states. The first and essential step in the establishment of an internal market is the removal of customs duties between the Member States. Thus, goods produced in any Member State are free to circulate and move across borders within the internal market without incurring custom duties. The internal market is the end result of a developed common market and the term ‘internal market’ (also referred to as the ‘single market’) has gradually replaced that of common market and is now the only term used in the Lisbon Treaty.†

What about goods produced outside the internal market? The Member States set up a Common Customs Tariff which sets common customs duties for goods imported into the internal market from third countries (i.e. countries outside the common market). Customs duties will be charged at the same rate on these goods wherever they enter the internal market, whichever country they enter into. So, for example, a watch from Russia will pay the same duty whether it enters Italy, France or Germany. Consequently, these imported goods are also free to circulate without incurring customs duties within the internal market.

The removal of barriers to trade within the internal market goes much further than this. The aim is to remove all barriers to free movement of goods, whether fiscal, physical or technical (see Chapter 10).

It is not only goods that are to circulate freely. The common market set up by the Treaty of Rome in 1957 guaranteed four freedoms:

free movement of goods

free movement of persons (Chapter 12)

free movement of services and freedom of establishment (Chapter 13)

free movement of capital.

Go to your study pack and read:Anneli Albi, A. and P. van Elsuwege, ‘The EU Constitution, national constitutions and sovereignty: an assessment of a “European constitutional order”’ [2004] 29 ELRev 741: pp.747–765;Deidre Curtin, D. ‘The constitutional structure of the Union: A Europe of Bits and Pieces’, CMLRev 30: pp.17–21; 66–69, 1993.

† Internal market: the idea is that companies can produce goods and sell them throughout the whole area of the internal market, leading to economies of scale, greater competitiveness, higher growth and greater incentive to innovate, giving the consumer the benefits of lower prices and greater choice. The end result is a growth in productivity for all participating countries. Where an internal market is fully realised, the markets of the participating countries will become merged into one market, like that of a single country.


Underlying the whole idea of the internal market is the principle that there should be no discrimination between Member States (Article 18 TFEU). This means that there should be no discrimination against the goods or persons from other Member States: the principle of non-discrimination established in the original Treaty of Rome as part of the common market did not afford protection to persons or goods from third countries.

The original Treaty of Rome also contained provisions establishing a Competition Policy (Articles 101–109 TFEU) to ensure competition was not distorted. This protects the consumer from, for example, cartels and monopolies artificially inflating prices. It also ensures that the internal market is not partitioned by companies deciding to share out national markets. A competition policy is an important element in the integration of the market as well as determining what sort of market – competitive and fair to consumers and small and medium companies – the internal market should be.

Further provisions aiming at the establishment of the internal market were rules prohibiting state aids, the establishment of a Common Commercial Policy, Common Agricultural Policy (CAP), Common Transport Policy and a Common Fisheries Policy.

Harmonisation and deregulation

It was expected that the internal market would partly be achieved by harmonisation of standards across the Member States, achieved by secondary legislation enacted by the Union institutions. In practice it has proved difficult to achieve agreement on common standards and the approach taken, led by the Court of Justice, has been deregulation: the achievement of free trade by the removal of national laws which create obstacles to free movement (see Chapters 10, 12 and 13). The original concept of an internal market also encompassed the gradual harmonisation of fiscal (tax) and social policy and ultimate convergence of economic and monetary policy.

2.2.2 European institutions and treaties At the founding of the first Treaty, the ECSC Treaty, in 1951, four institutions with legislative, executive and judicial powers were created to carry out the policies of the Community. These institutions were:

a High Authority

a Council of Ministers

a European Assembly (soon to become the European Parliament)

a European Court of Justice.

The Treaty of Rome followed this model and created an EEC and a Euratom Commission in parallel to the High Authority of that Treaty, while the other institutions had their powers extended to become institutions for all three Communities.

The aims and objectives of the EEC were set out in the Preamble to the Treaty of Rome and in Article 2.

The Preamble talks of the determination to ‘lay the foundations of an ever closer union among the peoples of Europe’, the resolution of the Member States ‘to ensure economic and social progress’ and affirms the objective of achieving ‘constant improvements of the living and working conditions’ of the peoples of Europe.

Article 2 of the original EEC Treaty gave the aims of the EEC in 1957 as the establishment of a common market through which would be promoted ‘harmonious development of economic activities, a continued and balanced expansion, an increase in stability, an accelerated raising of the standard of living and closer relations between the states belonging to it’. So, while there was always an idealistic strand in the impetus toward European integration, the primary aims and objectives of the EEC were largely economic in nature, centred on the creation of the common market.

Since 1957 the scope of competence of the European Union has been greatly increased by a series of treaties amending the original Treaty of Rome. The European Union


itself was established by the Treaty on European Union which came into force in 1993. The competence of the EU, that is the fields of activities where it has powers to act, now extends into many, and ever increasing, areas, including many aspects of social policy. This development will be traced later in this chapter as we consider the various treaties.

The result is that there are few areas of life now untouched by European Union law which now even extends to some parts of the criminal law, for example. This expansion has deepened the concerns over the lack of democratic accountability of the Union. This has been addressed primarily by increasing the powers of the European Parliament, which is another development traceable through consideration of the later treaties.

The law we are concerned with stems from the Treaty of Rome (the EEC Treaty) establishing what was originally the EEC and now is simply the EU (European Union).

Activity 2.1 a. What are the essential characteristics of the internal market?

b. State what benefits should come from this form of economic integration.

c. Explain what the Common Customs Tariff is.

d. Explain why there could not be free movement of goods from third countries (countries outside the common market) if there was no Common Customs Tariff. Think about this carefully! Can you see what the problems would be?

e. What are the main policies and institutions created by the Treaty of Rome?

f. Explain why the European Economic Community was called an ‘Economic’ Community.

Summary The EEC Treaty founded a ‘common market’, now called an internal market. An internal market is a form of economic integration where there are no barriers to trade between the participating states. The common market in Europe established the four freedoms: free movement of goods, persons, services and capital. It set up a Common Customs Tariff and a competition policy, among other policies. The underlying principle is that of non-discrimination, enshrined in Article 18 TFEU. This prohibits discrimination against goods, persons or services from other Member States. The aim of an internal market is to increase wealth and productivity within the participating states by economies of scale and greater competitiveness.

2.3 The development of the EU legal order in subsequent treaties

Essential reading Horspool and Humphreys, Chapter 2: ‘The Constitutional base of the Union’.


2.3.1 Synopsis of development of the Community to 1999 This is a brief summary, as an introduction and for later reference, and should be used in conjunction with reading in the textbooks.

Activity 2.2What were the main effects of the Treaty of Paris?

Go to your study pack and read Hartley, T.C. The Foundations of European Community Law: An Introduction to the Constitutional and Administrative Law of the European Community (Oxford: Oxford University Press, 2007) pp.21–22


Treaty of Rome 1957

The Treaties of Paris (1951) and Rome (1957) created the three Communities, the European Coal and Steel Community (ECSC), Euratom and the European Economic Community (see above).

In this course, we are not concerned with ECSC or Euratom, although a few pre-1965 cases are relevant which mention the earlier institutional structures of these communities.

The EEC (European Economic Community)

The EEC was established to create a common market in Europe based on the principle of non-discrimination between Member States (Article 7 in 1957 now Article 18 TFEU), characterised by the four freedoms (of goods, services, capital and people (both workers and self-employed persons)), a Common Customs Tariff, a Competition Policy, rules on anti-dumping and state aids, a Common Commercial Policy and Common Agricultural Policy; also a Transport Policy and the Common Fisheries Policy. The EEC originally had four institutions, the Council of Ministers, the Commission, the European Parliament, and the Court of Justice.

These will be described in detail in Chapter 3.

The Treaty sets out the structure and the powers of the institutions as well as the competences of the Community. It also outlines its legislative and judicial processes and provides the legal base for the secondary legislation. However it is what is known as a ‘traité cadre’, a framework treaty, and it was always envisaged that it would be completed by case law of the Court of Justice and secondary legislation.

1965 The Merger Treaty

To begin with, the three Communities had separate institutions, but these were amalgamated in 1965 in the Merger Treaty. The High Authority of the ECSC was merged with the Euratom and EEC Commissions to form a single body, the present European Commission, and the Council of the ECSC and Euratom were joined with the Council of Ministers (as it was then called) of the EEC.

The Luxembourg Accords

Voting procedure: qualified majority vote (QMV) and unanimityUnder the original Treaty of Rome in 1957, the Council (composed of representatives of the Member States) was the only legislative body (although legislation had to be initiated by the Commission).

The basic voting procedure for the adoption of legislation in the Treaty is by simple majority, and this is the default mode, used when no particular method of voting is specified. However, this is rare; usually Treaty Articles provide that a particular form of voting should be followed, either unanimity or qualified majority vote. Under unanimity, every country has a veto and no Member State is bound by any measure which it opposes. In these circumstances, any Member State can choose to be intransigent and refuse to compromise. It has been described as ‘decision-making in the shadow of the veto’.

Where, however, the vote is by QMV then the decision-making is supranational, any country can be overruled and bound by a decision which it has opposed if the necessary majority is in favour. Because no single Member State can block the passage of legislation under a qualified majority vote, the pressure is on Member States to reach workable compromises whereby each Member State gets some, at least, of what it wants. Member States must trade concessions to reach an agreement among enough Member States to get the required majority. Such a consensus is far easier to achieve than unanimity.

The qualified majority voting system for the EU is based on an allocation of votes per Member State. The numbers of votes are allocated according to each country’s population. These voting weights are set out in Article 238 TFEU. The numbers change when more countries accede to the European Union. Following the ratification of the


Treaty of Lisbon this system will change after 2014, but for the present the provisions of the Nice Treaty apply. Out of a total of 345 votes allocated among the 27 Member States, 258 are required for a qualified majority. In addition, a member of the Council may request verification that this number represents at least 62 per cent of the total population of the Union. This ‘double majority’ is sometimes referred to as ‘the demographic safety net’. As you can see, the required majority greatly exceeds the 51 per cent needed for a simple majority. Alliances of big and small Member States come together in various formations to create a majority.

Under the Treaty of Rome it was intended that after a transitional period, the Council would move from unanimous to qualified majority voting in many areas. However, when the time came, the French, under President de Gaulle, refused to give up the veto. Between 1965 and 1966 the French protest took the form of the ‘empty chair’ policy where French delegates refused to attend meetings in the Council, leading to total legislative paralysis. A compromise was finally reached in 1966 called the ‘Luxembourg Accords’ or ‘Luxembourg Compromise’. This was a non-legally binding agreement that, where a matter was considered to concern important national interests, discussion would continue until agreement was reached. France further stated that discussions should continue until unanimity had been achieved.

Hence the threat of a country using the veto was preserved, sometimes causing difficulties in the decision-making in the Council, when Member States were faced with matters of great importance to them, and leading to periods of stagnation in the 1970s and 1980s.

1970 Budgetary Treaty and Own-resources Decision

Two Budgetary Treaties were passed. The first, in 1970, changed the basis of the Community’s finances to the Community’s own financial resources (instead of national contributions) and strengthened the role of the Parliament in the budgetary process.

The Parliament henceforth adopted the budget in conjunction with the Council.

1975 Second Budgetary Treaty

The powers of the Parliament in the budget were further increased in the second Budgetary Treaty of 1975 giving the Parliament control over non-compulsory spending. Under the Lisbon Treaty, the Parliament now has control over all spending.

This Treaty also established the Court of Auditors.

1972–86 The Community enlarges and develops

1972 Accession of the UK, Denmark and Ireland

1981 Accession of Greece

1986 Accession of Spain and Portugal.

1979 Direct elections to the European Parliament

The European Parliament became the only directly elected international institution in the world. Its democratic mandate gave it a new legitimacy.

1986 The Single European Act (SEA)

Nearly 30 years after the Treaty of Rome, the SEA was the first amendment of the Treaty. The impetus for the SEA was a White Paper written by Lord Cockfield (a British Commissioner) published by the Commission which enumerated the approximately 282 trade barriers, physical, fiscal and technical, which still existed within the Common Market. The White Paper concluded that all the Member States would greatly benefit in terms of productivity and wealth if these barriers were removed. The result was the decision to launch a programme to complete the ‘single’ or ‘internal’ market by a deadline of 31 December 1992.

Effectively, this was a re-launch of the common market, although now the emphasis was on dismantling national trade barriers rather than on harmonisation of laws.


Introduction of QMV under Article 95 EC (now Article 114 TFEU)In order to achieve this target, the Single European Act introduced QMV (qualified majority voting) for measures to complete the single market in a new Article 100a (later Article 95 EC and now Article 114 TFEU). This broke the deadlock in the Council and was highly effective in getting the Community going again: the single market project has been judged a success.

The cooperation procedure The SEA also introduced a new legislative procedure (the cooperation procedure) used for some areas of the Treaty which greatly increased the Parliament’s role. Up to this time, the Parliament’s only involvement had been the right to be consulted on legislation, where there was provision in the Treaty. Now it played a greater role and where the Parliament disagreed with a measure, unanimity was required in the Council to pass it.

This procedure has now been replaced by the ‘co-decision’ procedure (see below) throughout the Treaties, except for provisions relating to Economic and Monetary Union, but its introduction in the SEA is still significant as a very important step in the enhancement of the powers of the European Parliament.

The assent procedure The European Parliament was also given a veto over the accession of new Member States and over the conclusion of association agreements under the assent procedure, voting by a majority of its component members.

Enlargement of Community competence The SEA also began the process of enlarging the competence of the Community by adding research and development, economic and social cohesion and environmental policy to the competences listed in Article 2. The competences of the Union set out the areas where the Union has competence to legislate.

Court of First Instance The SEA prepared for the introduction of the Court of First Instance (actually established in 1989). The Court of First Instance is now called the General Court of the European Union.

The European Council The SEA referred to the European Council (this is now one of the Community institutions and is discussed in Chapter 3) and placed its meetings on a formal footing.

The SEA brought about these changes by amending the original Treaty of Rome.

1992 The Treaty on European Union (TEU) (Maastricht Treaty)

This Treaty was signed in 1992 with the intention that it should come into effect in January 1993. However, this date was delayed until November of that year because of the ‘no’ vote by the Danish people in a referendum on whether to ratify the treaty (they voted ‘yes’ in a subsequent referendum after a Protocol had been added to the TEU containing concessions in matters of economic and monetary union and defence), and legal challenges in the UK (R v Secretary of State for Foreign and Commonwealth Affairs ex parte Rees-Mogg [1994] (2 WLR 115) and in Germany Brunner v European Union Treaty [1994] (1 CMLR 57)). The vote to ratify the Treaty in the UK Parliament was passed by the narrowest of margins after it was made a vote of confidence by the Conservative Government.

The Treaty created the European Union with a three-pillar structure. It substantially amended the Treaty of Rome adding citizenship, subsidiarity, economic and monetary union, many new competences, a new legislative procedure, co-decision, which made the Parliament a co-legislator as well as strengthening the role of the European Parliament in other ways. It also renamed the European Economic Community as the European Community (EC), reflecting its wider sphere of influence.

Go to your study pack and read O’Keeffe, D. and P.M. Twomey, Chapter 1 ‘The Treaty framework’, Legal Issues of the Maastricht Treaty (New York: Chancery Law Publishing, 1995).


2.4 Establishment of the European Union

2.4.1 The three-pillar structureThe Treaty on European Union (the Maastricht Treaty), which came into effect in 1993, created the European Union. The Union comprises the European Community (EC), which, together with ECSC and Euratom, constituted the first pillar of the Union.

Two more ‘pillars’ were added to the European Union. The second and third pillars were:

the Common Foreign and Security Policy (CFSP)

Justice and Home Affairs (JHA; called Police and Judicial Co-operation in Criminal Matters under the Nice Treaty).

These were areas of intergovernmental cooperation between the Member States which were governed by different institutional arrangements than the European Community pillar.

There is very little decision-making by QMV; the Council, usually acting by a unanimous vote, and the European Council (see below) are the most important institutions.

The Common Foreign and Security Policy

The second pillar was the Common Foreign and Security Policy (CFSP) (ex Articles 11–28 TEU, now Articles 23–41 Lisbon TEU). This was the beginning of a common foreign and defence policy for the European Community. Because this was a sensitive area affecting national sovereignty, the framework of this pillar was intergovernmental. The leading institution was the Council; the European Council, although initially not an institution, played a leading role in providing the impetus for the development of general guidelines and principles for the CFSP. The default method of voting was by unanimity although provision is made for voting by QMV by derogation. The CFSP has retained its intergovernmental character under the Lisbon Treaty.

The roles of the Parliament and Commission are limited; the Commission was to be ‘fully associated’ [ex Article 18.4 TEU] and the Parliament was to be consulted and informed [ex Article 21 TEU], although it was not specified that its views were to be taken into consideration.

The third pillar

The third pillar was originally called Justice and Home Affairs (JHA) (ex Articles 20–45 TEU) and was later called Police and Judicial Co-operation in Criminal Matters (PJCCM). This was concerned with policy matters relating to movement of persons across borders (asylum, immigration and third-country nationals, the control of international crime and cooperation by police and judicial authorities).

This pillar was also essentially intergovernmental, with a unanimous vote required except for the adoption of implementing measures. This third pillar was substantially amended by the Treaty of Amsterdam when it was re-named Police and Judicial Co-operation in Criminal Matters (PJCCM) and a large section dealing with visas, asylum and immigration and judicial cooperation in civil matters was moved back into the EC Treaty, into a new Title IV ex Arts 61–69 EC, concerned with establishing an area of Freedom, Security and Justice.

Member States as well as the Commission had the right of legislative initiative in these two pillars. To conclude, the European Community became the first pillar of the Union and the two areas discussed above were the second and third pillars respectively. These two pillars were not governed by the same law and institutional framework as the European Community pillar and they were intergovernmental in nature. The default method of decision-making is by unanimity and the institutions other than the Council had a reduced role. This remained true for the CFSP, whereas in subsequent treaties the third-pillar provisions were gradually more subjected to the ‘Community method’ and a clause known as the ‘passerelle’ (gangplank) clause in ex Article 42 TEU


made provision for third-pillar matters to be transferred to the first pillar after a vote in the Council. The Treaty of Lisbon has since abolished the three-pillar structure.

Former third pillar matters are now part of the Lisbon TFEU under Title V, ‘An area of freedom, security and justice, Articles 67–89 TFEU’. This covers asylum and immigration, judicial cooperation in civil and in criminal matters, and police cooperation. It deals with bodies cush as Europe, Eurojust and a European Prosecutor’s office. This Title is now entirely part of the institutional framework, and thus under the jurisdictio0n of the Court of Justice of the European Union and subject to the legislative procedures (ordinary and special), as described in Chapter 4.

2.4.2 Changes to the Treaty of Rome by the TEU The TEU substantially amended the Treaty of Rome (by Article 8 TEU). The main changes were as follows.

Introduction of citizenship of the Union See Articles 17–22 EC (now Articles 20–25 TFEU); see also Chapter 12.

Introduction of the principle of subsidiarity in Article 5 TEU (ex Article 5 EC); the principle of subsidiarity in general states that decisions should be taken at the lowest possible level, as close as possible to the individual. The Treaty refers to the relationship between the Member States and the EU and states that, in areas of shared competence, decisions should be taken at the Member State level except where the objectives of the action cannot be sufficiently achieved by action by the Member States and therefore for reasons of scale or efficiency should be dealt with at a Union level.

The Commission has to justify all proposed legislation with reference to subsidiarity. There was a reduction in the volume of legislation proposed by the Commission when subsidiarity came into effect which may have been a result of its review of proposals having regard to the principle.

Economic and Monetary Union (EMU)

Title VII Economic and Monetary Policy (EMU) Articles 98–124 EC (now Articles 120–144 TFEU).

The TEU introduced the aim of establishing EMU and introducing a common currency by 1 January 1999. Countries which wished to participate had to meet the convergence criteria, that is, the ratio of total government debt to gross domestic product (GDP) should not exceed 60 per cent and the ratio of annual government deficit to GDP should not exceed 3 per cent. On 1 January 1999, 11 countries joined EMU: Belgium, Italy, France, Spain, Portugal, the Netherlands, Luxembourg, Germany, Austria, Finland and Ireland. Greece has since met the criteria and joined, Denmark and the UK obtained an opt-out and Sweden was found not to meet the criteria and did not join. A single currency and interest rate now prevails across ‘Euroland’. The interest rate is set by a new institution, the European Central Bank (replacing the European Monetary Institute) which takes decisions regarding the currency. Its current president is Jean-Claude Trichet. A committee was set up to determine economic policy, the Council of Economic and Finance Ministers (ECOFIN).

Although it is important to know that these pillars exist and when they were introduced, no detailed knowledge of the second and third pillars is required for this course.

New competences added

Article 2 was amended to include: convergence of economic policies, social protection, economic and social cohesion.

Article 3 was amended to include: environment, health, education and training, flowering of cultures of Member States, development cooperation, consumer protection, energy, civil protection and tourism.


The co-decision procedure: Article 251 EC. A new legislative procedure was introduced by TEU which effectively makes the European Parliament a co-legislator with the Council. It gives the Parliament a veto over legislation.

Originally, this was only used in limited areas of the Treaty. See Chapter 4.

Enhanced role of the Parliament The role of the Parliament was strengthened in other ways. It was enabled:

to request the Commission to initiate a legislative proposal: Article 192 EC [Article 138b EC]

to set up temporary committees of inquiry: Article 193 EC [Article 138c EC]

to appoint an Ombudsman: Article 195 EC [ex Article 138e].

The Commission as a whole was made subject to a vote of approval by the Parliament: Article 214 EC [ex Article 158 EC].

1995 Accession of Finland, Sweden and Austria

Norway rejected membership in a referendum.

Self-assessment questions 1. Explain what is meant by the ‘Luxembourg Accords’.

2. Identify the main changes brought about by the Single European Act (SEA).

3. Explain what was meant by the single/internal market programme.

4. Identify the main changes brought about by the TEU.

5. State how the powers of the European Parliament have been increased by successive Treaties.

6. Explain how new legislative procedures have been added to the Community legal order since 1957.

7. Explain what subsidiarity is and when it was introduced into the Community legal order.

2.4.3 The Treaty of Amsterdam The Treaty of Amsterdam (ToA) came into effect in 1999.

Treaty of Rome amendments

New aims and objectives ToA added new aims and objectives under Article 2: Equality between men and women, ‘sustainable’ development, a high level of protection and improvement of the environment.

Environment Environmental concern was incorporated both in Article 2 EC and also in a new Article 6 EC.

Co-decision procedure The ToA greatly simplified the co-decision legislative procedure. It also expanded the scope of application of the co-decision procedure (see TEU), and the cooperation procedure was replaced by co-decision in all areas except EMU.

New competence to combat discrimination A new competence in this area was introduced by Article 13 EC giving the Council powers to ‘take appropriate action to combat discrimination based on sex, racial or ethnic origin, religion or belief, disability, age or sexual orientation’. Several Directives have now been legislated on this legal base. See Chapters 3 and 14.

The Social Chapter The Social Chapter Protocol was repealed and its provisions were incorporated into the EC Treaty itself after its ratification by the UK’s incoming Labour government in 1997. It is included in the Treaty under a new Title XI, Articles 136–145 EC.


Enhanced cooperation (or variable geometry)†

Article 43 TEU (the parent provision), Article 40 TEU and Article 11 EC.

The ToA marked the introduction of ‘variable geometry’, a new institutional procedure whereby groups of Member States may act on initiatives together, within the framework of the EU, to establish closer cooperation. This means that groups of States can decide to integrate further, creating a Europe of concentric circles. Economic and Monetary Union was not established using this procedure, as it was set up by TEU, but it is an example of this type of variable geometry.

Powers of the European Parliament in regard to the appointment of the Commission

Article 214 EC was amended so that now the European Parliament’s approval is required for the appointment of the President of the Commission.

Increased transparency and protection of liberty, democracy and human rights

The ToA marks a greater commitment to openness and freedom of information.

Article 1 TEU: decisions are now to be taken ‘as openly as possible’.

Article 2 TEU introduces the aims of promoting ‘a high level of employment’ and the aim of maintaining and developing the Union as an area of ‘freedom, security and justice’.

Article 6 TEU states that the Union is founded on principles of liberty, democracy, respect for human rights and fundamental freedoms and the rule of law.

Article 7 TEU: ‘serious and persistent breach’ of these principles leads to suspension of rights for a Member State.

Protection of human rights under Article 6.2 TEU [Article F] is made justiciable under Article 46 TEU [Article L].

Article 43 TEU: introduction of variable geometry in the intergovernmental second and third pillars.

Provisions of the other important treaties mentioned, the SEA and Treaties of Amsterdam and Nice (ToA and ToN) are never referred to separately as they only amended the Treaty of Rome (SEA) or the Treaty of Rome and the Treaty on European Union (the Treaties of Amsterdam and Nice amended both the former Treaties).

2.4.4 The Treaty of Nice The Treaty of Nice (ToN) came into force on 1 February 2003.

This Treaty remained in force until the ratification process of the Treaty of Lisbon (see below) was completed.

The major changes to the EC Treaty are as follows, and include the changes implemented by the Protocol on Enlargement.

Qualified majority voting (QMV)

Change from unanimous voting to qualified majority voting in 39 areas.

Institutions

The Commission Provisions to change the composition of the Commission were adopted under the Protocol on Enlargement. When the 10 new Member States joined the European Union in May 2004, the number of Commissioners rose to 30 but, as agreed, when the new Commission took office in November 2004, the five largest Member States (France, Germany, Italy, Spain and the United Kingdom) lost their second Commissioners and the new Commission, which took office on 22 November 2004, had 25. Since accession by Romania and Bulgaria, there have been 27 Commissioners.

† The procedure for enhanced cooperation was amended by the Treaty of Nice, see below.


Commissioners The new Commission is under the Presidency of Jose Manuel Barroso up to 2009 when a new Commission will be appointed.

All these changes to institutional structures are summarised in the chapter on institutions (Chapter 3).

The EC will have one Commissioner per Member State until it reaches 27 members. After that, a rotational system will be introduced.

Article 214: Nomination of the President of the Commission shall now be by the Council, meeting in the composition of Heads of State or Government (rather than by common accord of the Member States) and will be by QMV.

Both the choice of the members of the Commission and the vote approving the appointment of the President and other members of the Commission as a body will now be QMV. The President’s powers over the organisation of the Commission are increased:

Article 217: The Commission President is to determine the internal organisation of the Commission so that it acts consistently, efficiently and on the basis of collective responsibility.

Article 217(4): A member of the Commission is to resign if requested by the President of the Commission after obtaining the collective approval of the Commission.

European Parliament Article 189: the maximum number of MEPs is increased to 732.

European Parliament’s standing under Article 230 and Article 300

Article 230: The European Parliament now is a privileged applicant for bringing an action for judicial review. It is not restricted to actions to protect its prerogatives.

Article 300(6): The European Parliament can also now obtain the opinion of the ECJ as to whether an agreement is compatible with the provisions of the Treaty.

The Council of the European Union

Until the new allocation of votes in the Treaty of Nice, the smaller countries had proportionately more votes in relation to their populations compared to the larger Member States. The new weighting redresses the balance to some extent while still leaving them with an advantage.

However, in a very significant new development, a QMV now may also require that the qualified majority comprise at least 62 per cent of the total population of the Union.

This increases the importance of Germany, with its big population, relative to the other large Member States with which it has a parity of votes in the Council.

The Commission

Article 4(2) states that when the Union consists of 27 Member States, Article 213(2) EC shall be amended to lay down that the number of members of the Commission shall be less than the number of Member States, and will be chosen according to a rotation system based on the principle of equality, according to implementing arrangements adopted by the Council, acting unanimously.

Article 4(4) states that up to that point, any state which accedes to the Union shall be entitled to have a Commissioner. In fact, up to the present time, with 27 Member States, there are still 27 Commissioners, but this is set to change under the Lisbon Treaty.

The judicial structure

In order to address the problem of a large backlog of cases and consequent long delays, certain changes to the judicial structure were introduced by ToN. These have been set out in Chapter 3.


Enhanced cooperation

The procedure for setting up enhanced cooperation (variable geometry) has been simplified by the Treaty of Nice.

Under Clause A, ‘General Principles for Enhanced Co-operation’, to be inserted into TEU, the requirement for enhanced cooperation has been changed from requiring ‘at least a majority’ of States (Article 43(1)(d) TEU) to ‘a minimum of eight States’. It is no longer possible for one Member State to veto closer cooperation by other States.

All that a Member State, which wishes to prevent enhanced cooperation going ahead, can do is to request that the matter be referred to the European Council.

May 2004 Accession of Estonia, Lithuania, Latvia, Poland, Hungary, the Czech Republic, Slovakia, Slovenia, Malta and Cyprus

January 2007 Accession of Bulgaria and Romania

The next step in Treaty terms was the calling together of a Convention under former French President Valéry Giscard d’Estaing, to consider the future of Europe. The Convention was composed of 113 members both from current Member States and from what were then the applicant countries. The representatives were drawn from governments, national Parliaments, the European Parliament and the Commission. The result was a text entitled Draft Treaty Establishing a Constitution for Europe. The Draft Treaty was adopted by all Member States in 2004 and the ratification process then commenced. A number of countries, including Spain and Germany ratified, both in referenda and by the parliamentary route. The British Prime Minister announced that the UK would be holding a referendum. However, before this could happen, the text of the Draft Treaty was rejected in referenda held in France and the Netherlands, both founder members of the EC. This stalled the ratification process and a ‘period of reflection’ followed.

In the period following the rejection of the ‘Constitution’, seven other Member States suspended the ratification process. Since then, the Treaty of Nice has remained in force. However, in June 2007 the European Council decided to search for a compromise which would take account of the fact that the ratification process had been completed in two thirds of Member States and the remaining third had reservations. The terms of the compromise were defined very clearly and were mainly of a technical nature. There were some differences of opinion of a political nature which were quickly overcome and this enabled the European Council to reach unanimous agreement in October 2007.

The new Treaty was subsequently signed by all Member States on 13 December 2007 in Lisbon and it received the name of ‘Reform Treaty’ or ‘the Lisbon Treaty’. The new Treaty was intended to come into force before the European Parliament elections in June 2009. However, in June 2008, Ireland, the only country to have a referendum, voted ‘No’ to the Lisbon Treaty.

For the purposes of your studies, you are expected to know about the events of the past three years leading up to the rejection of the Constitution and the subsequent adoption and ratification of the Lisbon Treaty.


2.4.5 The Treaty of Lisbon This Treaty amending the Treaty on European Union and the Treaty on the Functioning of the European Union was signed at Lisbon, 13 December 2007.

Brief overview

The Treaty of Lisbon was established on the basis of a comparison between two sets of texts: the Constitutional Treaty (or ‘Constitution’) which served as its point of departure, and the existing Treaties.

The nature and provisions of the new Treaty made it possible for the Member States to proceed to ratification without resorting to referenda, in contrast to what happened with the Constitution. For example, France, the Netherlands and the UK made it clear that the parliamentary route, rather than the route of the referendum, would be followed.

A key difference between the Lisbon Treaty and the Constitution is that the former does not claim to be ‘constitutional’. This is demonstrated in the terminology used in the new text: the ‘Minister of Foreign Affairs’ becomes the ‘High Representative’; and the renaming of legislative acts is scrapped, maintaining the present names ‘Regulation’ and ‘Directive’. The supremacy of European Union law is no longer expressly contained in the Treaty. Instead, a Declaration (No 27) recalls that the supremacy of Court of Justice case law has been defined explicitly. This is accompanied by a legal opinion by the legal service of the Council pointing out that the absence of the principle in the Treaty does not change anything in the existence of the principle or the case law of the Court of Justice. Any mention of symbols of the Union: flag, anthem, motto, are absent from the new Treaty. Significantly, the Lisbon Treaty is presented as a Treaty amending the previous treaties in force, not as a text replacing them.

The new Treaty appears as simply another step in the unbroken line of treaties since the Treaty of Rome. The Treaty on European Union (TEU) retains its title; whereas the title of the Treaty establishing the European Community is changed to ‘Treaty on the Functioning of the European Union’ (TFEU) containing articles on institutional procedures and policies of the Union. The new Treaty includes previous pillar areas in which the EU had little involvement. Finally, all references to the EC were removed, as was the ‘three-pillar’ structure which was established in the Maastricht Treaty (TEU) in 1992.

The Treaty of Lisbon amends and preserves the provisions (amending those in the Nice Treaty) on:

a two-and-a-half-year Presidency of the European Council

a High Representative (Foreign Minister in the proposed Constitution) to represent the Union in Foreign Affairs and who will be a Vice President of the Commission

the scope of qualified majority voting, mainly through the co-decision procedure: 15 Articles were changed by the Constitution from unanimous voting to QMV and 24 new Articles with QMV were introduced

the introduction of the principle of conferral, which states that the Union will not go beyond the powers conferred on it by the Member States in the Treaties. See Chapter 4 for more discussion of the principle of conferral. Conferral encompasses the principles of subsidiarity and proportionality (see Article 5 TEU)

the scope of co-decision with the European Parliament

distinctions between legislative and non-legislative acts; the Lisbon Treaty retains the previous terminology

a ‘solidarity clause’, similar to ex Article 10 EC

improved governance of the eurozone

own resources, the multi-annual financial framework of the EU and the budgetary procedure

what were previously third-pillar matters: changes to the voting system and a right of veto.


The following provisions are different to those originally proposed in the Constitution:

Specific definition of Member State and EU competences is given.

A Protocol with interpretative provisions on ‘services of general economic interest’ (i.e. state-provided social services).

Provisions enabling some Member States to proceed with measures on police and judicial cooperation while others do not participate.

An extension of the UK’s ‘opt-out’ from the third pillar defined in 1997.

A role for the national Parliaments in applying a ‘passerelle’ clause on ex-third-pillar matters relating to family law.

A specific reference to energy supply solidarity between Member States.

A restriction on European space policy.

A specific authorisation to the EU to take action to combat climate change at international level.

Retention of Article 308 EC (the ‘catch-all’ clause) and now Article 352 TFEU, but with a provision stipulating that it may not apply to the CFSP (which is included in the TEU, not the TFEU).

According binding force to the Charter of Fundamental Rights via a ‘Protocol’, accompanied with a separate Protocol providing the possibility for an ‘opt-out’ to the UK and Poland.

A role for national Parliaments, including a subsidiarity check.

The EU acquiring a legal personality and beginning negotiations for EU accession to the ECHR.

Amendment of EU accession conditions via the addition of the so-called Copenhagen criteria (the conditions of eligibility agreed upon by the European Council).

Further provisions of the Treaty will be referred to in the relevant chapters (Chapters 3 and 4 in particular).

The contents of the Lisbon Treaty are to be found on the Europa website: http://europa.eu/lisbon_treaty/index_en.htm

For a detailed analysis of the two parts to the Treaty (TEU and TFEU), see: House of Commons Library Research Papers 07/80 (TEU) and 07/86 (TFEU).

The provisions of the Treaty of Lisbon yet again included a complete re-numbering of Treaty articles.

Activity 2.3a. Go through the summary of changes brought about by the Treaties subsequent

to the Treaty of Rome and write a list of the main changes in the role and/or status of the European Parliament. Identify which of these relate to an increase in its legislative role.

b. Explain what the relationships between the European Economic Community, the European Community and the European Union are. Describe the three-pillar structure of the European Union and when and how this was changed.

c. In your own words, explain the significance of the difference between voting by unanimity and by qualified majority for the development of Union law.

d. State whether it becomes easier or harder to reach a unanimous vote as the number of Member States becomes larger.

e. State when ‘citizenship’ was added to the European Union legal order. Explain what qualifies an individual to be a citizen of the EU.


Reflect and review

Look through the points listed below:

Are you ready to move on to the next chapter?

Ready to move on = I am satisfied that I have sufficient understanding of the principles outlined in this chapter to enable me to go on to the next chapter.

Need to revise first = There are one or two areas I am unsure about and need to revise before I go on to the next chapter.

Need to study again = I found many or all of the principles outlined in this chapter very difficult and need to go over them again before I move on.

Tick a box for each topic.

Ready to move on

Need to revise first

Need to study again

I can list the six founding Member States of the EEC.

I can explain what the ECSC and Euratom are.

I can state what the Council of Europe, European Convention on Human Rights and Freedoms (ECHR) and European Court of Human Rights are.

I can explain why the ECHR and European Court of Human Rights are not part of the European Union.

I can identify the essential elements that create a common market.

I can identify the four original Institutions of the EEC and the institutions that have been added since.

I can state when the EEC became the EC, and then the EU.

I can describe the original three-pillar structure of the European Union.

I can explain what is meant by the principle of ‘dual vigilance’.

I can describe the ‘teleological’ approach of the Court of Justice.

I can describe the benefits of a common or internal market and give a general account of what gives rise to these benefits.

I can state the essential features of the EEC created by the Treaty of Rome.

I can explain the original relationship between the European Community and European Union.

I can explain what is meant by a qualified majority vote (QMV) in the context of Community law and why it was thought necessary to move from voting by unanimity to voting by qualified majority.

I can explain the developments brought about by the Treaty of Lisbon


If you ticked ‘need to revise first’, which sections of the chapter are you going to revise?

Must revise

Revision done

2.1 Background to the establishment of the European Economic Community (EEC)

2.2 The European Economic Community established by the Treaty of Rome 1957

2.3 The development of the EU legal order in subsequent treaties

2.4 Establishment of the European Union

3 The institutions of the European Union

Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32

3.1 The merging of the original institutions . . . . . . . . . . . . . . . . . .33

3.2 The European Council . . . . . . . . . . . . . . . . . . . . . . . . . . .34

3.3 The European Parliament (EP) . . . . . . . . . . . . . . . . . . . . . . .35

3.4 The Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39

3.5 The Council of the EU . . . . . . . . . . . . . . . . . . . . . . . . . . .43

3.6 The Court of Justice of the European Union (comprising the Court of Justice, the General Court and specialised courts) . . . . . . . . .48

3.7 The Court of Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . .51

3.8 The European Central Bank (ECB) . . . . . . . . . . . . . . . . . . . . .52

3.9 Advisory bodies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53



Introduction

This chapter gives an overview of the composition, functions and powers of the institutions of the European Community and the other bodies created under the Treaties. We will look at the evolution of powers and the interrelationship of these institutions, how they cooperate with each other and also the methods by which they scrutinise and act as checks and balances on each other, ensuring that the institutional balance of the EC is maintained.

You may also find the following websites for the institutions useful and interesting:

Court of Justice of the European Communities: http://curia.europa.eu/

European Parliament: www.europarl.eu.int

Council of the European Union: http://ue.eu.int

European Commission: http://ec.europa.eu/

Commission Competition Directorate website: http://ec.europa.eu/

European Research Papers Archive (ERPA): http://eiop.or.at/erpa/The Jean Monnet archive of research papers on EC Law can also be found at the above site.

The information on these websites is very well presented and accessible.

A brief summary of the consolidation of the institutions of the three original Communities will be followed by consideration of the institutions of the EU (as listed in Article 13 TEU) the European Council, the Commission, the Council, the Parliament, the Court of Justice and the General Court, the Court of Auditors and the ECB, along with their associated bodies. Then, the advisory bodies ECOSOC and the Committee of the Regions will be described.


state which institutions are listed under Article 13 TEU and explain what their inclusion in this Treaty Article means about their powers

give a brief account of the interaction between the Commission, the Council and the Parliament in regard to the adoption of the budget

describe the European Parliament’s role in the appointment of the Commission and explain how the Parliament exerts control over the Commission

explain how the Parliament’s powers have increased with regard to: legislative procedures; control and supervision of the Commission; control of the acts of the other institutions through participation in judicial review proceedings (in outline only – this is dealt with in detail in Chapter 4)

describe the composition of the Commission and how it is appointed

define the functions of the Commission (the details of this will become clearer as you progress through the other chapters)

describe the European Council, explain the difference between the European Council and the Council of the European Union and distinguish between these and the Council of Europe

describe the role of the President of the European Council

define and explain the role of the Council of the European Union

describe the role of the High Representative of the European Union

describe how a qualified majority vote (QMV) is reached

explain the significance of the Council Presidency

define the composition and explain the function of COREPER

list the main legislative procedures of the European Union

Please note that, subject to the Regulations, you can take your copy of EU Legislation into the examination with you and much of the content of this chapter is referred to in the relevant sections of the Treaty. Although you should refrain from directly quoting sections of the Treaties as this wastes time and will not gain you any marks, referring to the relevant Treaty provisions in your answer and using the Treaty as a memory aid would be helpful.

EU Law 3 The institutions of the European Union page 33

list the different Treaty Articles which enable cases to be heard before the ECJ, stating which are direct actions

explain the role of the Advocate General

describe how the institutional balance of the European Union (formerly the Community) has changed since 1957.

3.1 The merging of the original institutions

Essential reading Horspool and Humphreys, Chapter 3: ‘The Institutions of the Union’, sections

3.1–3.6, pp.39–41.


In order to achieve the objectives of the original EEC, the Treaty of Rome of 1957 (the EEC Treaty) established four institutions, listed in Article 7 EC:

the Commission

the Council

the European Parliament (the European Parliament was called the Assembly until the Single European Act)

the European Court of Justice.

The ECSC and Euratom were also created, with four institutions each. All three Communities – the EEC, ECSC and Euratom – had a shared Assembly and Court.

The Merger Treaty of 1965 provided that:

the High Authority of the ECSC should be merged with Euratom’s Commission and the EEC’s Commission to form a single Commission

the respective Councils of Euratom and the ECSC should be joined with the Council of the EEC to create a single Council of Ministers.

So from then on the three Communities, ECSC, Euratom and the EEC, were served by the same four institutions.

The Treaty on European Union added a fifth institution – the Court of Auditors – to those listed in Article 7 EC. The Court of Auditors was originally established under the Budgetary Treaty of 1975. The Court’s inclusion in Article 7 EC reflected its increasing importance as auditor of the Union’s expenditure.

The Treaty of Lisbon then added two more institutions to this list in what is now Article 13 TEU: the European Council and the European Central Bank.

From the wording of Article 13 TEU it is clear that the Union institutions listed there can ‘act’ – that is, they can create binding measures as opposed to the other Union bodies, whose role is advisory.

We will consider the institutions listed in Article 13 TEU, starting with the European Council, a body which has become very significant in the political and constitutional development of the Union.

The TEU has reinforced the unity of the institutions by providing expressly for a single set of institutions within an ‘institutional framework’ and subject to the principle of conferral (Article 13 TEU).

Activity 3.1 List the institutions included in Article 13 TEU.

No feedback provided.

Go to your study pack and read Hartley, T.C. The Foundations of European Community Law: An Introduction to the Constitutional and Administrative Law of the European Community (Oxford: Oxford University Press, 2007) pp.66-70, pp.443-445.


3.2 The European Council

Essential reading Horspool and Humphreys, Chapter 3: ‘The Institutions of the Union’,

sections 3.7–3.9, pp.41–42.

Craig and de Búrca, Chapter 2(4): ‘The European Council’, pp.55–57.

www.european-council.europa.eu/

The European Council is now one of the institutions of the EU and is listed in Article 13 TEU. It is of great importance. It originally arose out of informal meetings between the heads of state or government of the Member States during the 1970s. Since 1974, it has held regular summits and its composition has been formalised. It now meets at least twice a year. At these meetings, high-level decisions about the future development of the European Union are made and disputes between Member States (for example, over budget contributions) are addressed. The CFSP is subject to specific rules and procedures and is largely defined and implemented by the European Council, together with the Council. (See Articles 24, 26, 27, 31 and 32 TEU.)

The European Council, however, has no legislative powers, and any legislative action must be taken by the Council of the EU. The European Council was first given a legal basis by the Single European Act. Article 15 TEU sets out the tasks of the European Council and states that it is ‘to provide the Union with the necessary impetus for development and to define the general political guidelines’ of the EU. It comprises:

the heads of state or governments of the Member States

the ministers for foreign affairs

the President of the Commission

the High Representative for Foreign Affairs and Security Policy.

Now the European Council has become an institution, it also has standing before the European Court of Justice, in respect of an action under Article 263 TFEU ‘to review the legality of acts by the European Council intended to produce legal effects vis-à-vis third parties.’ (See also 9.2.2.)

It must be emphasised that the European Council is a separate institution to the Council. It does not have any legislative powers but, because of its status, it has great political power. It should be noted that its members are heads of governments of the Member States, except for France where the President (who is head of state) is a member, together with the French Prime Minister.

The European Council should not be confused with the Council of Europe, which is a non-EU, totally separate body with different membership, different powers and institutions, dealing mainly with cultural and social matters. The Council of Europe’s main achievement is arguably the European Convention on Human Rights and Freedoms (ECHR, 1950). See also 2.1, final paragraph.

The President of the European Council

The TEU provides (in Article 15 (5)) for an election by qualified majority of a President for a term of two and a half years, renewable once. In the event of an impediment or serious misconduct, the European Council can end the President’s term of office in accordance with the same procedure. The President of the European Council prepares and chairs meetings of the European Council, to be held every six months. He (or she) ‘drives forward’ its work and represents the Union ‘at his [or her] level’ and ‘without prejudice to the powers of the High Representative of the Union for Foreign Affairs and Security Policy’. He or she may not hold national office. The Belgian Herman van Rompuy was elected the first President of the European Council in January 2010. The functions of the President are only very generally described in the Lisbon Treaty (see Article 15(3) and 15(6) TEU). It will only become clear gradually how these functions are actually carried out and what effect the actual weight of the President’s authority will have in respect of EU policies.


3.3 The European Parliament (EP)


sections 3.39–3.52, pp.60–66.

Craig and de Búrca, Chapter 2(5): ‘The European Parliament’, pp.58–66.

www.europarl.europa.eu/

3.3.1 The European Parliament (EP): Articles 13 and 14 TEU, Articles 223 and 224 TFEU (ex Articles189–201 EC)The greatest institutional change in the evolution of the European Union has been the development of the powers and status of the EP. The Parliament has gone from being merely a ‘talking shop’ in 1957 with the power, at most, to be consulted (sometimes) by the Council on legislative proposals, to being a co-legislator in many areas of the Treaty with real powers of scrutiny and supervision over the other institutions.

The ‘story’ of its development reflects the increasing preoccupation with the problem of the ‘democratic deficit’ at the heart of the institutional arrangements of the European Union.

Originally, there was no democratically elected institution in the EC. In 1979 the first direct elections to the EP took place, making it the only directly elected international body in the world. However, in itself this was insufficient to address the democratic deficit unless the European Parliament was also accorded real powers and a real part in the legislative process. Each Treaty has substantially increased the powers of the Parliament; today it has a crucial part to play in the institutional dynamics of the Union.

Note, however, that although it fulfils the two normal functions of a legislature, enactment of legislation and scrutiny of other institutions, unlike national legislatures it does not have sole power to enact legislation; even now, it is the less important legislator in key areas of Union competence and the Council remains the principal legislative body for the European Union. The Parliament’s power remains a negative one: it can veto legislation but it cannot propose it.

3.3.2 Composition The body that was to develop into the European Parliament was initially called the Assembly and was one of the institutions of the ECSC. It had just 78 members, who were MPs from national parliaments with a double mandate. This was expanded to 142 members when it became the Assembly for all three Communities in March 1958.

The first direct elections to the Parliament were in 1979. The allocations of MEPs from each Member State were negotiated for the Nice Treaty and the incumbent Parliament was elected into office in 2009.

The maximum number of seats is set by Article 14 TEU at 751 with ‘degressively proportional’ representation of a country’s citizens. The maximum number of members per country is set at 96, the minimum being six. However, the present membership of the EP stands at 736. In order to raise the number to 751 as provided by the Lisbon Treaty, the EP voted in May 2010 to admit 18 new members to take their seats during the current legislature. The only country which will lose seats under the Lisbon Treaty is Germany, whose seats will be reduced to 96, but this will not happen until the term of the next Parliament. That is why the number of MEPs will temporarily rise to 754. This amendment needs to be ratified by all 27 Member States, without the need to call a Convention to effect this Treaty change. For the latest composition of the Parliament, refer to the European Parliament website (www.europarl.europa.eu).


MEPs sit in transnational groups according to political affiliation. Currently, the political groups are:

EPP European People’s Party (Christian Democrats)

S&D: the progressive Alliance of Socialists and Democrats in the EP

ALDE: Alliance of Liberals and Democrats for Europe

Greens/European Free Alliance: Greens/EFA

European Conservatives and Reformist Group (ECR)

Confederal Group of the European United Left–Nordic Green left: GUE/NGL

Europe of Freedom and Democracy Group: EFD

Non-attached: NA

Elections are held in accordance with national voting systems, subject to some conditions.

The system must be a form of proportional representation, but the type is to be determined by the Member State.

Parliaments should propose either a uniform, Union-wide electoral procedure or the Member States should choose the method ‘in accordance with principles common to all Member States’ (Article 223(1) TFEU (ex Article 190(4) EC)).

MEPs are elected for a five-year term. The Parliament elects a President and 14 Vice-presidents. It draws up its own Rules of Procedure (Article 232 TFEU (ex Article 199 EC)). Much of the EP’s work is done in political groups and committees. As mentioned above, MEPs are organised into transnational political groups, which are represented in the EP’s 20 standing committees. These standing committees do the preparatory work for the main sessions of Parliament; each committee has a chairman, a vice-chairman and secretariat. The committees are responsible for adopting reports on legislative proposals.

In the TEU, the European Parliament was given the power:

to set up temporary committees of inquiry (Article 226 TFEU, ex Article 193 EC)

to appoint an Ombudsman (Article 228 TFEU (ex Article 195 EC)).

The Ombudsman’s task is to consider allegations of maladministration by Union institutions or bodies, other than the Courts acting in their judicial role. He may initiate an investigation himself or respond to a complaint received from an individual or via an MEP. The Ombudsman will then report to the EP and to the institution concerned.

The TEU also introduced Article 194 EC, now Article 227 TFEU, allowing all citizens of the EU to petition the Parliament. Any citizen, resident or company with its registered office in the Union may petition the Parliament about matters which concern them directly.

The Parliament is peripatetic – most of its plenary sessions are held in Strasbourg (France), for one week per month but most of the committee meetings are held in Brussels, Belgium; its Secretariat is in Luxembourg. This is clearly inefficient and wasteful but attempts to rationalise its organisation have met with resistance from the host Member States.†

The TEU introduced Article 191 EC, now Article 10(4) TEU and Article 224 TFEU, which emphasises the importance of the development of political parties at European level. At the moment, the low turnout at European Parliament elections undermines its claim to address the democratic deficit.

The Citizenship Articles in the Treaty (Articles 20–25 TFEU (ex Articles 17–22 EC)) provide that every citizen of the Union shall have the right to vote and stand in local and European Parliament elections in any of the Member States. In two cases, C-145/04

† See: Case 103/83 Luxembourg v EP [1984] ECR 1945. A 1983 resolution was incompatible with the Member States’ decision concerning the provisional location of the EP’s places of work and was therefore void. See also Case 358/85 France v EP (Re Brussels Meetings) [1986] ECR 2149.


Spain v UK [2006] ECR I-7917 and C-300/04 Eman and Sevinger v College van Burgemeester en Wethouders van Den Haag [2006] ECR I-8055, the Court of Justice agreed that nationals of a Member State resident overseas (in Gibraltar in the first case, on the Caribbean island of Aruba in the second) should be allowed to vote in national and EP elections. In the ‘Gibraltar’ Case the UK had made rules providing for Gibraltar UK citizens to vote after the ECtHR ruling in: Matthews v UK [1999] ECHR 12 whereas in the second case the Dutch government had attempted to exclude the Aruba residents from voting although Dutch nationals resident in a non-EU country had such rights.

3.3.3 Powers and functions of the EP In 1957 the European Parliament’s only role in the enacting of legislation under the Treaty was to be ‘consulted’ when so required by the Treaty. This procedure applied in a limited number of areas of Community competence. Where required by the Treaty, the Council had to send its final legislative proposal to the Parliament for its opinion before the proposal could be legislated. The Council did not have to incorporate the Parliament’s opinion or give reasons for rejecting it.

The Court of Justice, in the first of a line of cases which strengthened and consolidated the Parliament’s position in the EU legal order, ruled that the Parliament must be consulted when so required by the Treaty. Failure to observe this essential procedural requirement is a ground for annulment under Article 263 TFEU. See: Case 137/79 Roquette Frères v Council [1980] ECR 3333.

The first important extension of the Parliament’s powers was made by the two budgetary Treaties of 1970 and 1975. The Parliament was given the task of adopting the budget in conjunction with the Council. The Lisbon Treaty makes further changes and attempts to streamline the procedure. The procedure, in broad outline, is as follows. The difference between compulsory and non-compulsory expenditure has been abolished and the EP has the same involvement in the entire budget. Before the Lisbon Treaty, the EP had less control over compulsory expenditure than over non-compulsory expenditure. Compulsory expenditure was defined as: ‘Expenditure necessarily resulting from this Treaty’ and included in particular the budget for the Common Agricultural Policy which makes up about 45 per cent of the total budget. Thus the budgetary powers of the Parliament have been considerably extended.

The SEA (1986) introduced a major extension of the European Parliament’s power with the introduction of the ‘cooperation procedure’, Article 252 EC. This procedure gave the Parliament a ‘say’ in the legislative procedure but did not go far enough and has now been abolished by the Treaty of Lisbon. The SEA also introduced the ‘assent procedure’, which is now included under the term ‘special legislative procedure’ (see Article 297(1) TFEU) where the EP, voting by an absolute majority of its component members, is given the power of veto in a limited number of areas such as Accession of new members (Article 49 TEU) and signing of Association Agreements. This procedure now also applies to the suspension of a Member State for serious and persistent breaches (Article 7(1) TEU).

The ‘co-decision procedure’ (Article 251 EC) was added to the EC legal order by the Maastricht TEU. The European Parliament legislated in conjunction with the Council and was finally granted the power of veto over legislation. This procedure was significantly extended in scope by the ToA which also replaced the cooperation procedure by co-decision in all areas except those relating to Economic and Monetary Union. The ToA also greatly simplified the co-decision procedure in a way that strengthened the position of the Parliament so that the European Parliament finally became a co-legislator with the Council in those areas in the Treaty to which this procedure applies. It is now the most widely used legislative procedure. This enhancement of the importance of the European Parliament’s role in the legislative process of the European Union is a highly significant development in the history of the Union (legislative procedures are discussed in further detail in Chapter 4). The Lisbon Treaty extends the co-decision procedure to become the ordinary legislative procedure (see Article 294 TFEU).


The Parliament’s status in judicial review proceedings

In the 1957 Treaty of Rome, the European Parliament was not mentioned as one of the institutions which had standing to bring an action for judicial review under Article 230 EC (now Article 263 TFEU). This is discussed in Chapter 4 but it is important that you should be aware of how the powers of the EP have been strengthened by the Court of Justice in regard to Article 263 TFEU. This would be relevant to an essay on the changing role of the Parliament since 1957. In a series of highly creative judgments, the Court rewrote the Treaty in order to give the European Parliament the status of an institution whose actions could be judicially reviewed where they had legal effects with respect to third parties, and to bring actions itself under Article 263 TFEU to protect its prerogatives. (This is described as a semi-privileged applicant, see Chapter 9.) See: Case 294/83 Les Verts v EP [1986] ECR 1339; Case 302/87 EP v Council (Comitology) [1988] ECR 5615; Case 70/88 EP v Council (Chernobyl) [1990] ECR I-2091.

These changes were then formally recognised in the changes to the EC Treaty introduced by the Maastricht TEU. In the Treaty of Nice, the European Parliament was given the status of a ‘privileged’ applicant under Article 230 EC (now Article 263 TFEU) putting it in the same position as the Council, the Commission and the Member States, having unrestricted standing in judicial review proceedings. This gives the European Parliament the power to challenge acts of the other institutions.

These cases are further discussed in Chapter 4.

The Parliament has used its powers under Article 263 TFEU to challenge the legal base of legislation where it considers that a legislative procedure over which it had more influence should have been used. See: Case C-295/90 EP v Council Re Students Rights [1992] ECR I-4193; Case C-187/93 EP v Council (Waste Case) [1994] ECR I-2857.

The Parliament’s role in the appointment of the Commission

The position of the Parliament has been significantly strengthened in regard to the appointment of the Commission. Since the Maastricht TEU, the appointment of the Commission as a whole has been subject to a vote of approval by the European Parliament; since the ToA, the nominee for the President of the Commission has also had to be approved by a majority vote of the Parliament.

For the censure vote under Article 234 TFEU (ex Article 201 EC) by which the European Parliament can, by a two-thirds majority, force the resignation of the Commission as a whole, see below where this is discussed in regard to the Commission.

In the Treaty of Lisbon, as under the Nice Treaty, the Parliament can still only approve the entire Commission as a body. On the basis of the Parliament’s consent the European Council then appoints the Commission by a qualified majority.

The Commission must reply to oral and written questions from the Parliament (Article 230 TFEU, ex Article 197 EC); the Council has accepted that it should respond to questions from the Parliament, as required by the Parliament’s own Rules of Procedure (Rules of Procedure 44, 45 and 46). Each year, the Parliament poses roughly 4,500 written questions and 600 questions for oral response; this is a very significant part of its role as scrutineer of the other institutions.

A protocol on ‘the Role of National Parliaments in the EU’ was annexed to the ToA. A new Article 12 in the Lisbon TEU sets out the role of national parliaments in the EU. This includes a ‘yellow card’ subsidiarity check for national parliaments.

Self-assessment questions 1. When did the European Parliament become directly electable?

2. How many MEPs does it consist of and how are they organised?

3. Where does the Parliament sit?

4. What is the ‘democratic deficit’?

5. List the primary functions of the European Parliament.


6. List its powers.

7. What role did the Parliament play in the legislative procedures of the Community in 1957?

8. Describe the Parliament’s role in the consultation procedure.

9. Describe the European Parliament’s role in the adoption of the Commission.

10. How does the Parliament exert control over the Commission?

Activity 3.2a. What was the significance of the decision in Case 137/79 Roquette Frères?

b. In what way has Parliament’s role in the legislative procedure been strengthened through case law and consecutive treaties?

c. Why has Parliament’s role in the appointment of the Commission been increased?

3.4 The Commission


sections 3.20–3.38, pp.52–60.

Craig and de Búrca, Chapter 2: ‘The Institutions’, pp.75–84.

http://ec.europa.eu/index_en.htm

3.4.1 Structure and powers of the Commission (Article 17 TEU and Articles 244–250 TFEU)The European Commission is the institution which, above all, represents the Union’s interest. Its role is:

to propose new policies and initiate legislation

to act as the ‘Guardian of the Treaties’ – the Commission is the ‘watchdog’ concerning infringements of Union law

to enact delegated legislation

to act as the executive of the Union, implementing Union policies and supervising their implementation by the Member States.

In certain areas, the Commission has the power to legislate in its own right. It also has powers:

to mediate between Member States in the Council

to represent the EU in external relations.

At present, there are 27 Commissioners, one for each Member State. After the accession of the 10 new members in 2004, the four large countries (France, Germany, Italy and the UK) lost one Commissioner each. If they had not, there simply would not have been enough worthwhile portfolios for all the Commissioners. The Nice Treaty limited membership of the Commission to one per Member State as from 2005, and imposed a ceiling of 27 once enlargement had taken place. This therefore meant that if and when further enlargement occurred, some countries would be without a Commissioner for a period. From 1 November 2014, when a new Commission is appointed the number of members of the Commission will correspond to two-thirds of the number of Member States, unless the European Council, acting unanimously, decides to alter this number (Article 17(5) TEU; see also Article 244 TFEU). After the entry into force of the Treaty of Lisbon, however, a decision was taken by the European Council, ‘in accordance with the necessary legal procedures’, to the effect that the Commission shall continue to include one national of each Member State (see Presidency Conclusions of the


Brussels European Council of 11 and 12 December 2008 in Brussels, EU Bulletin 12-2008, I(4), at (2)). Thus, the number of Commissioners will continue to be one per Member State for the time being, allaying Irish fears of losing a Commissioner and with it any influence it has in the European Union. This was one of the factors which contributed to the positive Irish vote in their second referendum in October 2009.†

The independence of the members of the Commission must be beyond doubt; this is a most important requirement (Article 17(3) TEU). They must act in the interest of the Union and be completely independent in the performance of their duties. They are not permitted to seek or to take instruction from any government. Their term of office is five years and is renewable.

Appointment of the Commission

The President of the Commission is proposed to the European Parliament by the European Council acting by qualified majority and this person is then elected by the European Parliament by a majority of its component members. The Commissioners are then selected according to a strict system of rotation laid down by the European Council (Article 244 TFEU); the Commission as a whole is then subject to a vote of approval by the Parliament. The current President, Jose Manuel Barroso, is in his second term, having been re-elected in 2009. The President then appoints the Vice Presidents from among the Commissioners. One of the Vice Presidents is the High Representative of the Union for Foreign Affairs and Security Policy (see 3.4.4 and Article 18 TEU). The Commission President also selects which Commissioner will hold which portfolio (see below). The Commissioners as a whole make up the College of Commissioners which takes decisions by a simple majority vote.

Although the Parliament does not have the power to veto the appointment of individual Commissioners, it can veto the appointment of the Commission as a whole. This power is rarely used but several proposed Commissioners have been forced to withdraw, or been withdrawn by the government which proposed them, after the Parliament had signalled its disapproval. Thus, the European Parliament demonstrated that it can effectively supervise the Commission and that its powers are to be taken seriously.

3.4.2 The Commission 2004–09 and 2009–14 In 2004 a new Commission was appointed under the Presidency of Jose Manuel Barroso. Its term of office expired in 2009, after the elections to the European Parliament. Mr Barroso was then re-appointed for a second term, still under the terms of the Nice Treaty as the Lisbon Treaty had not yet come into force. Although the Lisbon Treaty provides in Article 17 TEU that the number of Commissioners should be two-thirds of the number of Member States, appointed in strict rotation, there are at present still 27 Commissioners (see 3.4.1 for an explanation of this). Each Commissioner has a private office (or cabinet) headed by a chef de cabinet. The cabinet usually consists of five officials appointed by the Commissioner (added by the ToN).

The President of the Commission has an important and influential position, being responsible for:

policy initiatives

shaping overall Commission policy

coordinating Union policy.

The President of the Commission also has the power:

to ‘decide on its internal organisation in order to ensure that it acts consistently, efficiently and on the basis of collegiality’

to appoint Vice-Presidents and to allocate portfolios among the Commissioners and to reshuffle them during the Commission’s term of office

to request a Member of the Commission to resign, having obtained the approval of the College of Commissioners.

† Until the enlargement in 2004, the five larger states (France, Italy, Germany, UK and Spain) had two Commissioners.


Structure

The Commission is divided into a number of departments called Directorates-General (DGs) or Services, which are similar to ministries, each covering different areas of policy such as:

agriculture

fisheries, transport and energy

research

environment

the internal market

competition

employment and social affairs

taxation and customs union

education and culture

trade

external relations

justice and home affairs.

The Director General of each area of policy is answerable to the Commissioner given responsibility for that area.

As well as the Commissioners and their cabinets, the Commission currently employs about 34,000 permanent staff, equivalent to civil servants, of whom nearly 3,000 are translators and interpreters. With 23 official languages, the Commission requires a large number of translators and interpreters to work each day and the staff translators and interpreters are supplemented by a large number of freelance translators and interpreters.

Meetings of the College of Commissioners are convened by the President and take place at least once a week. Voting is by simple majority.

3.4.3 Functions of the Commission: ‘Watchdog of the Union’ or ‘Guardian of the Treaties’? The Commission has a number of main roles as watchdog of the Union.

Under Article 258 TFEU (ex Article 226 EC)The Commission is entrusted with the role of investigating infringements of the Treaties by the Member States. Where possible, the matter will be resolved informally by negotiation and discussion; where this is not possible, the Commission brings the Member State before the Court of Justice. The Court may then make a Declaration that the Member State is in breach of its duties under the Treaty. This used to be the only penalty that the Member State incurred. Under an additional procedure introduced by the Maastricht TEU, an additional paragraph in Article 260 TFEU (ex Article 228 EC) has permitted the Commission to bring a further action against a Member State that has not complied with the Court’s Article 258 judgment, which may result in the Court imposing fines (see Chapter 8).

Under Articles 101 and 102 TFEU (ex Articles 81 and 82 EC) These are the provisions that govern competition law in the Union and the Commission has the principal role in this area. It develops policy and legislates, and it has responsibility for enforcing these provisions against undertakings (companies) that are in breach. It investigates, comes to a decision and, where appropriate, imposes penalties.


Initiation of policies and legislation The Commission has the very important role of initiating legislation – all legislative proposals are drawn up by the Commission. The Council and European Parliament can propose policies for legislative action to the Commission under Article 241 TFEU (ex Article 208 EC) or Article 225 TFEU (ex Article 192 EC), respectively, but the Commission has the final say on whether the proposal is drawn up into a legislative proposal. It is also responsible for drawing up the annual legislative programme. These powers give it the role of ‘the motor of integration’.

This refers to the Commission’s role in initiating and drawing up legislative proposals which take the policies and objectives of the European Union forward. Its proposals have the effect of furthering the aim of completion of the internal market which means further integration.

Legislative powers The Commission can legislate unilaterally in a limited number of areas (i.e. under Article 45(3)(d) TFEU (ex Article 39(3)(d) EC)) and Article 106 TFEU (ex Article 86(3) EC). Where such a power is granted, these powers enable the Commission to enact legislation in a true sense. See: Joined Cases 188–190/80 France, Italy and United Kingdom v Commission [1982] ECR 2545.

The Court of Justice has also determined that when the Treaty gives the Commission a specific task, it impliedly confers on the Commission the powers that are indispensable in order to carry out that task, including the necessary legislative powers: Joined Cases 281, 283– 285, 287/85 Germany, France, Netherlands, Denmark and the United Kingdom v Commission [1987] ECR 3203.

The Commission also enacts delegated legislation under powers conferred by the Council. This accounts for a large proportion of the Union’s legislation each year (see Chapter 4 for further details).

The Commission also puts forward policy initiatives such as the White Paper on Completing the Internal Market put forward in 1985 (see Chapter 2).

Executive powers

The Commission oversees and supervises the implementation of European Union policies in the Member States by the national authorities and seeks to ensure uniform application.

It has an important role in the drawing up and adoption of the Union budget in conjunction with the European Parliament.

It also has significant powers of expenditure, especially in regard to the Common Agricultural Policy (CAP) and to structural funds, through which funds are channelled to poorer regions of the Union.

External relations

The Commission represents the European Union in its dealings with other states and with international organisations, such as the UN, WTO, Council of Europe and OECD.

Censure of the Commission Article 234 TFEU (ex Article 201 EC)

The European Parliament has always had a power to dismiss the Commission as a whole (by a two-thirds majority of the votes cast) in a vote of censure under Article 234 TFEU (ex Article 201 EC).

In January 1999, such a vote was taken as a result of allegations of fraud, mismanagement and nepotism against the Commission. The necessary two-thirds majority was not achieved, but the European Parliament set up an independent Committee of Inquiry. When this Committee reported back in March 1999, its report was highly critical of the Commission. It found that individual members of the Commission had indeed made inappropriate appointments and had failed to act in response to allegations of continuing irregularities in programmes for which they had responsibility. The Commission as a whole was found to have failed to take collective responsibility.


When the individual Commissioners named in the report refused to resign, the whole Commission resigned rather than face a further vote of censure from the European Parliament, which it might well have lost.

3.4.4 The High Representative of the Union for Foreign Affairs and Security Policy (Article 18 TEU)The Treaty of Lisbon introduces a ‘High Representative of the Union for Foreign Affairs and Security Policy’ (Article 18 TEU). This person is appointed by the European Council, acting by a qualified majority, with the agreement of the President of the Commission. The High Representative conducts the Union’s common foreign and security policy and contributes by their proposals to the development of that policy, which they carry out as mandated by the Council. The same applies to the common security and defence policy. The High Representative presides over the Foreign Affairs Council. They are one of the Vice-Presidents of the Commission and deal with the Union’s external policies.

Thus, the High Representative represents the Council when chairing the Foreign Affairs Council, and coordinating Union action under the CFSP, but is also one of the Vice-Presidents of the Commission; a ‘double-hatted’ function. Baroness Ashton, the British Commissioner up to that point, was appointed in January 2010 as the first High Representative. The High Representative has an External Action service at her command. This has been established by the Council with the consent of the Commission and after consulting the European Parliament; it is set to comprise a large civil service working in cooperation with the diplomatic services of the Member States and comprising officials from relevant departments of the General Secretariat of the Council and of the Commission as well as staff seconded from national diplomatic services of the Member States. Further details are to be established by a Council decision (Article 27(3) TEU).

Activity 3.3a. In your Public law course, you learned about the three organs of the state, the

executive, the judiciary and the legislature and the importance, according to constitutional theory, of their separation. How would you classify the Commission? Does it accord with the doctrine of separation of powers?

b. Explain the mechanism by which the Parliament can force the resignation of the Commission.

c. Has this procedure ever been used?

3.5 The Council of the EU


sections 3.9–3.19, pp.42–52.

Craig and de Búrca, Chapter 2(3): ‘The Council’, pp.48–54.

www.consilium.europa.eu/showPage.aspx?id=&lang=en

3.5.1 Role and composition The Council was known as the Council of Ministers until 1993, when its name was changed to the Council of the European Union. The Lisbon Treaty simply refers to it as ‘the Council’. The Council represents national interests – the interests of the Member States. It is the main legislative and decision-making body of the Union. It considers legislative proposals from the Commission and, usually acting by qualified majority vote (QMV), it decides whether to enact them or not. Under the 1957 Treaty of Rome, it was the only legislative body, with sole power to enact legislation. As we have seen in the section above, this power has increasingly been shared with the European


Parliament, reflecting the Parliament’s status as the one democratically elected institution of the Union.

The Council is composed of representatives of the Member States at ministerial level, authorised to commit the government of that Member State to specific action. Each government delegates to the Council one of its members according to the matter being discussed at any particular meeting. For example, national ministers of agriculture make up the Agricultural Council and national ministers of finance constitute the Economic and Finance Council.

Although there is now a permanent President of the European Council, the Council retains the practice of allowing each Member State to hold the presidency for a period of six months. This system has become increasingly high profile; the country holding the presidency will have an agenda and will initiate proposals. There is an informal arrangement whereby the current President of the Council works in conjunction with the previous and next President.

The Presidency has no function attributed to it in the Treaty; its original tasks were to convene and chair Council meetings and sign legislation and other acts, such as international treaties, on behalf of the Council, but it has gained far greater importance as the Union has developed. The Presidency holds ministerial meetings in different configurations, according to Article 16(9) and Article 236 TFEU. Only the General Affairs Council and the Foreign Affairs Council are excluded from this. The Foreign Affairs Council ensures consistency of the work of the different Council configurations and liaises with the President of the European Council and the Commission in ensuring the follow-up meetings of the European Council. The Foreign Affairs Council is chaired by the High Representative. The President of the Council represents the Union on many important occasions in the international arena. Any country holding the Presidency is intent on achieving special objectives which it usually announces at one of the summit meetings of the European Council before the beginning of its Presidency and presents to the European Parliament after having consulted the Commission. Particular emphasis will be laid on some aspect of Union policy and the Presidency will endeavour particularly to push through Union measures concerned with such objectives.

Article 207 EC (now Article 240 TFEU), inserted by the Maastricht TEU, recognised the General Secretariat of the Council under the responsibility of a Secretary-General. The Secretary-General oversees the day-to-day work of the Committee of Permanent Representatives which prepares the work of the Council (see 3.4.2). Until the Treaty of Lisbon he acted as the Council’s High Representative in the common foreign and security policy. This is now a separate function created by the Lisbon Treaty (see 3.4.4).

Voting in the Council

The Council can legislate either unanimously, by a qualified majority or (now in very rare cases) by a simple majority. The voting system varies between different policy areas and is specified in the relevant Treaty Article. Where the Council is required to act by a qualified majority, the votes of its members are weighted according to a system provided by Article 238 (2) (ex Article 205(2) EC). The legislative procedure set down in the Treaty for any particular competence is crucial; the influence of the Parliament and the form of voting required in the Council make a great deal of difference to how easily a particular measure will be enacted.

Voting strengths in the Council are listed in Protocol No 36 on Transitional Provisions and the distribution of votes for each Member State (after accession in January 2007 of Romania and Bulgaria) until 31 October 2014 is as follows.


Germany, France, Italy, United Kingdom, each 29

Spain, Poland, each 27

Romania 14

Netherlands 13

Belgium, Czech Republic, Greece, Hungary, each 12

Austria, Bulgaria, Portugal, Sweden, each 10

Denmark, Ireland, Lithuania, Slovakia, Finland, each 7

Cyprus, Estonia, Latvia, Luxembourg, Slovenia, each 4

Malta 3

Total votes 345

For a QMV, 255 votes are required, representing a majority of the members (where the legislative proposal does not come from the Commission, a two-thirds majority is required).

A new and very significant element to voting weights was added by the ToN and came into effect on 1 January 2005:

In addition to the qualified majority specified above, a Member State may ask for confirmation that the votes in favour represent at least 62 per cent of the total population of the Union. If this is found not to be the case, the decision will not be adopted. This provision favours Germany, with its large population, and makes up for the fact that its weighting of votes does not properly represent its size. In general, small countries are still over-represented in terms of the weighting of votes and this new requirement compensates, to some degree, for this.

For a QMV on a Commission proposal, ‘at least a majority’ of the Member States must be in favour. Where the vote is taken on a proposal not put forward by the Commission, then two-thirds of Member States must vote in favour.

The Treaty of Rome set out a transition from unanimity to voting by qualified majority at the end of the transitional period. However, because of France’s opposition, virtually all decisions made by the Council between 1966 and the enactment of the Single European Act were taken without a vote and on the basis of unanimity (see Chapter 2). This practice was the result of the 1966 Luxembourg Accords or the Luxembourg Compromise, according to which the Member States agreed that unanimity would be applied in cases when important national interests were at stake. This political agreement was not legally binding. Nonetheless, as it had the effect of giving each Member State a veto, it hampered European Community decision-making severely until the adoption of the Single European Act.

The Single European Act (1986) introduced qualified majority voting for measures to complete the internal market, and this transformed the decision-making processes of the Community. In the Treaty of Amsterdam, the Luxembourg Compromise was also ‘allowed to creep into the new Article 23 TEU, second sub-paragraph’ which provides for action in the second pillar, the Common Foreign and Security Policy, by qualified majority in adopting joint actions and in taking decisions implementing joint action. This is now contained in the CFSP Chapter of the TEU in Article 31, where the amended wording reads as follows:

If a member of the Council declares that for vital and stated reasons of national policy it intends to oppose the adoption of a decision to be taken by qualified majority, a vote shall not be taken. The High Representative will, in close consultation with the Member State involved, search for a solution acceptable to it. If he does not succeed the Council may, acting by a qualified majority, request that the matter be referred to the European Council for decision by unanimity.


The ‘Ioannina Compromise’ on enlargement

In March 1994, at the European Council meeting in Ioannina in Greece, new Member States were about to be admitted to the Community. The proposal was that on accession of the new Member States Austria, Sweden, Finland and Norway (which later refused to join after a referendum) the number of votes required for a ‘blocking minority’ would rise from 23 votes to 27 votes. This proposal met with opposition from the UK, initially supported by Spain. It advocated the retention of the present system, which would mean that two large Member States could block a decision with the support of just one small Member State. Raising this number, as had been done previously upon the accession of other countries, would mean that at least one other country’s votes would be needed to obtain a blocking minority. In Ioannina, Spain soon dropped its opposition to the proposal, leaving the UK exposed. Eventually, a compromise was reached which was acceptable to the UK and negotiations for new membership could proceed.

At Ioannina it had been agreed that the whole question should be re-examined by the 1996 inter-governmental conference (IGC). However, agreement could not be reached there and the Treaty of Amsterdam in a ‘Declaration to the Final Act’ states that the Compromise shall stay in place until the entry into force of the first enlargement, thus confirming the binding nature of the agreement. Unlike the Luxembourg Accords, it is not limited to ‘very important interests’, so it could be used on any matter and this makes it potentially more open to abuse than the Luxembourg Accords. Whether the Agreement was justiciable has never been tested by the European Court. The Court has held that any Union act which creates legal effects, irrespective of its nature, is an act sui generis which is subject to the Court’s jurisdiction. See: Case 22/70 Commission v Council (ERTA) (1971).

Thus, two agreements concluded under pressure mostly from one particular country in each case, were given legitimacy by incorporation into the Amsterdam Treaty. The Nice Treaty had been thought to have effectively repealed the Ioannina Compromise in its Protocol and Declaration, but the Treaty of Lisbon now provides that if a group of Member States is close to forming a ‘blocking minority’, discussions must continue until a solution satisfying both parties is achieved within a reasonable period, while respecting any compulsory time limits set by Union law. A declaration annexed to the Treaty provides that the Council will take a decision concerning the application of the compromise and will indicate how it should be applied.

Between 1 November 2014 and 31 March 2017, a group of Member States will be deemed to constitute a blocking minority if it contains at least three quarters of the population or three quarters of the Member States necessary to constitute a blocking minority.

As from 1 April 2017 (i.e. when a Member State can no longer request the application of the rules under the Nice Treaty), these percentages will go down to 55 per cent.

Furthermore a Protocol provides that such a Council decision may only be changed after authorisation by the European Council by common accord. See Protocol No 36 on Transitional Provisions, Title II Article 3.

It should be noted that the new ‘Ioannina clause’ is only a political compromise based on qualitative judgments concerning a ‘satisfactory solution’ within a ‘reasonable period’ and should not be interpreted in strict legal terms. It is rather the expression of the wish for the Council to be able to continue its work. However, this shows again how important the ‘numbers game’ is in the eyes of the Member States.

The Treaty of Lisbon adds another 39 areas for QMV.


3.5.2 COREPER – Article 240(1) TFEUCOREPER is a French acronym for the Committee of Permanent Representatives.

Clearly, ministers of the Member State governments are busy people. Much of the work in the Council is done by COREPER. These are permanently posted senior national officials appointed at ambassadorial rank, who address the issues and negotiate on behalf of their governments. Most of the business of the Council is effectively dealt with at this level. Those matters that are satisfactorily agreed by these representatives are sent to the relevant Council meeting as an ‘A list’ meaning that they require no further discussion but can simply be agreed at the Council meeting. Items which require further discussion at ministerial level are set on the agenda for discussion as ‘B list’ items.

There are two levels, COREPER I and II. COREPER II is more senior, dealing with political and institutional matters, economic and financial affairs and external relations. COREPER I is composed of deputy permanent representatives who look at legislative proposals concerning the environment, social affairs, the internal market and transport. COREPER is assisted by 150–250 working groups at any time, some permanent, some temporary, made up of national experts who advise on the proposals put forward by the Commission.

3.5.3 The relationship between the European Council and the CouncilAlthough the European Council is now a fully-fledged institution (Article 13 TEU), it has no legislative function. Therefore, any legislative action which may have been decided upon by the European Council will need to be carried out by the Council. The European Council therefore acts in conjuntion with the Council. See for example: Article 7(2) TEU (determination of a serious and persistent breach of fundamental values), Article 48 (Treaty revision), Article 50 (withdrawal of a Member State from the Union), the Common Foreign and Security Policy, the Area of Freedom, Security and Justice (e.g. Articles 83(3), 86(1) second subparagraph 86(4), 87(3)).

Activity 3.4a. Define and explain the role of the Council.

b. What would be the composition of the ‘Transport Council’?

c. Explain the requirements for a qualified majority vote to be approved.

d. Explain the significance of the Council Presidency.

e. Explain the functions of the High Representative and of the President of the European Council.

f. Use your copy of EU legislation to state which legislative procedure is used for:

Article 43 TFEU Agriculture

Article 114 TFEU The internal market

Article 207 TFEU The Common Commercial Policy

Article 21 TFEU Citizenship

Article 157 TFEU EC Sex equality

Article 19 TFEU Non-discrimination

Article 223 TFEU Procedure for parliamentary elections

Article 91 TFEU Transport.

g. Define the composition and explain the function of COREPER.

h. Why does it matter whether voting is by qualified majority or unanimity?

i. Explain the significance of the Luxembourg Accords and the ‘Ioannina Compromise’.


3.6 The Court of Justice of the European Union (comprising the Court of Justice, the General Court and specialised courts)


section 3.54, p.66; Chapter 4: ‘The European Courts’, sections 4.1–4.6, pp.73–75.

Craig and de Búrca, Chapter 2(6): ‘Courts’, pp.66–76.

http://curia.europa.eu/

Articles 19 TEU and 251-281 TFEU.

3.6.1 The courts The European Union’s Court of Justice of the European Union had three tiers of court: the European Court of Justice (referred to as ‘the Court’), the General Court (formerly the Court of First Instance (CFI)) and a third tier of specialised courts.

The function of these Courts is to ensure that, ‘in the interpretation and application of the Treaty, the law is observed’ (see Article 19(1) TEU). This wording provides a grounding for the European Courts’ dynamic case law which upholds the ‘Rule of Law’.

Composition

The Court of Justice consists of 27 judges, one from each Member State, who are assisted by eight Advocates General. The judges and Advocates General must be chosen ‘from persons whose independence is beyond doubt and who possess the qualification required for appointment to the highest judicial offices in their respective countries or who are jurisconsults of recognised competence’ (Article Article 253 TFEU (ex Article 223 EC)). They are either academic lawyers, judges or senior lawyers of the competence to be appointed to the highest judicial office.

For the General Court, the status required is slightly less exalted: ‘persons whose independence is beyond doubt and who possess the qualification required for appointment to high judicial office’ (Article 254 TFEU (ex Article 224 EC)). Both Courts elect their own presidents. The term of office is a renewable six years; there is a partial replacement every three years. In both Courts, judges are chosen from those with the proper qualifications for the highest judicial appointments in their home country or who are jurisconsults of recognised competence, by ‘Common Accord’ of the governments of the Member States after consultation with a panel – composed of former members of the Court of Justice and the General Court, members of national supreme courts and lawyers of recognised competence – which gives an opinion on candidates’ suitability to perform the duties required (see Article 255 TFEU)).

The Court of Justice normally sits in chambers of five or three judges; it rarely sits in plenary session but it can for highly significant cases. Where a Member State or an institution is one of the parties, they can request the Court to sit in a Grand Chamber of thirteen.

3.6.2 The methodology and jurisdiction of the European Court of Justice The procedure consists of:

1. a written stage

2. brief oral argument

3. presentation of the Advocate General’s opinion

4. judgment by the Court.

This procedure relies heavily upon written documents, and oral argument is intended mainly to fill gaps or elaborate on specific points.


The role of the Advocate General

An Advocate General is appointed to each case before the Court and delivers his/her opinion before the Court itself considers the case. The role of the Advocate General is to present a reasoned and exhaustive examination of the facts and the relevant law and to give his opinion on how the case should be decided. This opinion will clearly have a great influence on the Court but it is not binding. Although the Court in a majority of cases will follow the Advocate General’s opinion, in some important cases, the Court has chosen not to do so. See, for example: Advocate General Lenz in Case C-91/92 Faccini Dori v Recreb where the Court refused to follow his opinion proposing horizontal direct effect of Directives (see Chapter 6). Sometimes, however, opinions influence the future development of the law by the Court in later cases.

The judgment of the Court of Justice itself is always a single collegiate judgment; there are no dissenting opinions. There is no formally established system of precedent in Union law, and although a de facto system has developed the Court will sometimes depart from its earlier case law. It has consistently stressed that any national court is free to re-refer a question to the Court which has already been addressed although, in practice, rulings of the Court are treated as precedents by the national courts.

As already mentioned in Chapter 2, the Court adopts a teleological or purposive approach, considering the overall aims and objectives of the Treaty, actually using the ‘spirit’ or ‘inherent system’ of the Treaty as grounds for a decision. The jurisdiction of the Court is divided between:

direct actions: Articles 263, 265, 268, 270 and 272 TFEU. Direct actions take place before the General Court

preliminary references from the national courts: Article 267 TFEU.

Where a case in a national court raises an issue of Union law, the national court may refer a question concerning the validity or interpretation of Union law to the Court of Justice, and in some cases to the General Court for a ruling under the Article 267 TFEU reference procedure. The Court of Justice rules on the point of Union law in the form of answers to questions posed by the national court, but does not determine the outcome of the case. The decision on the point of Union law is sent back to the national court which applies it in the case before it. The national court determines the outcome of the case.

We shall consider the following in detail in Chapters 7–9 but a brief summary follows.

Article 258 TFEU (ex Article 226 EC): Actions by the Commission against Member States in breach of their Union law obligations.

Article 260 TFEU (ex Article 228 EC): Another action by the Commission if the Member State fails to remedy the breach.

Article 259 TFEU (ex Article 227 EC): Action by one Member State against another for breach of Union law obligations.

Articles 268/340 TFEU (ex Articles 235/288 EC): Actions for damages by individuals against the Union institutions.

Article 263 TFEU (ex Article 230 EC): Action for judicial review.

Article 265 TFEU (ex Article 232 EC): Action for failure to act against Union institutions.

Article 267 TFEU (ex Article 234 EC): Where a question of the interpretation or validity of Union law arises in a case before the national court, the court may refer the matter for a preliminary ruling to the Court of Justice.


3.6.3 The General Court The caseload of the Court of Justice has increased dramatically since the EC was established, with the result that it takes a very long time for cases to reach the Court and judgment to be made. In order to alleviate this problem, the Single European Act in 1986 provided for the establishment of a Court of First Instance (CFI) with limited jurisdiction under Article 225 TEC (now Article 256 TFEU). The CFI was established in 1988 by Council Decision 88/951 and began work in the autumn of 1989. The Court was renamed the General Court of the European Union by the Treaty of Lisbon, and the number of judges is determined by the Statute of the Court of Justice of the European Union. The current number is 27 members, one per Member State. It sits in chambers of three or five judges. It does not have separate Advocates General but it may call on one of its members to perform the task of an Advocate General; this person may not then take part in the judgment of the same case.

Originally, the CFI was given jurisdiction to hear staff cases based on the EC Treaty, actions brought by coal and steel undertakings under the ECSC Treaty and, importantly, actions brought by undertakings under Article 230 EC (now Article 263 TFEU) and Article 232 EC (now Article 265 TFEU) relating to the implementation of the competition rules applicable to undertakings. When you study competition law, many of the cases you will consider will be actions brought by companies (undertakings) seeking judicial review of decisions of the Commission, brought in the CFI under Article 230 EC (now Article 263 TFEU).

The jurisdiction of the General Court has subsequently been extended so that it now has jurisdiction over all actions under Article 263 TFEU (judicial review), Article 265 TFEU (actions for failure to act), Articles 268 TFEU and 272 TFEU (actions for damages against the Union), except for those reserved in the Statute of the Court of Justice for the Court of Justice itself. Article 51 of the Statute currently states that direct actions brought by an institution, body or agency and the Member States must be heard before the Court of Justice.

Therefore the cases of greatest importance are heard before the Court of Justice. It is possible for the Statute to be amended.

Since the ToN, Article 225(3) EC (now Article 256(3) TFEU) also permits the General Court to take preliminary rulings under Article 234 EC (now Article 267 TFEU) in certain areas to be laid down by statute. This power has not yet been activated: competition law will probably be the first area to be included. When the General Court does eventually take such references and it considers that a case involves a matter of principle likely to affect the unity or consistency of Union law, it may refer the case to the Court of Justice for a ruling instead. Its decisions under Article 267 TFEU may also be exceptionally subject to review by the Court of Justice for the same reason. The General Court also acts as an appeal court for the Civil Service tribunal, a specialised court which hears staff cases.

Appeals from decisions of the General Court

Note that appeals from decisions of the General Court on points of law may be made to the Court of Justice and must be made within two months.

The expansion of the jurisdiction of the General Court attempted to improve the delays in the system of justice in the European courts which was expected to be exacerbated by the recent expansion to include 12 new Member States. At the time of writing, the increase in the number of judges following enlargement has in itself improved the situation and court statistics show that waiting times are reducing.

Specilaised courts

Another innovation introduced by the ToN to address the problem of the backlog of cases in the European courts was the amendment of the EC Treaty to allow for the creation of specialised courts to hear and determine at first instance certain classes of action or proceeding brought in specific areas (Article 225a EC). The first of these is now established (Article 256 TFEU, ex Article 225a EC and Decision 2004/752/EC).


It is the ‘European Union Civil Service Tribunal’, which has jurisdiction to hear cases involving disputes between the Union institutions and their servants (staff disputes) at first instance. As Staff cases constitute 25 per cent of the cases brought each year, this has considerably eased the burden. It is attached to the General Court and has its headquarters there. There is an appeal to the General Court which can, exceptionally, under Article 256 TFEU then be reviewed by the Court of Justice where there is a serious risk of the unity or consistency of Union law being affected.

The Civil Service Tribunal consists of seven judges, appointed for six years. They are appointed by the Council acting unanimously after consulting a committee made up of seven former members of the Court of Justice and General Court and lawyers of recognised competence. The first judges were sworn in in October 2005.

The main qualifications are that they must be independent and ‘possess the ability required for appointment to judicial office’.

Activity 3.5a. Explain the difference between a direct action and the preliminary reference

procedure under Article 267 TFEU.

b. List the different Treaty Articles which enable cases to be heard before the Court of Justice, stating which are direct actions.

c. Explain the role of the Advocate General.


3.7 The Court of Auditors


sections 3.55–3.56, pp.67–68.

Craig and de Búrca, Chapter 2(7): ‘The Court of Auditors’, pp.76–77.

http://eca.europa.eu/portal/page/portal/eca_main_pages/splash_page

Articles 285–287 TFEU.

The Court of Auditors (which is not a court in the legal sense) describes itself as ‘the financial conscience’ of the EC. It was established in its present form by the 1975 Budgetary Treaty and was added to the list of Community institutions in Article 7 EC by the Maastricht TEU.

It is composed of one auditor per Member State who ‘shall be chosen from among people who belong or have belonged... to respective audit bodies or who are especially qualified for this office’ (Article 286 TFEU).

Its task is to examine the accounts of the Union and audit the accounts of revenue and expenditure of the EU. This audit is not simply an accounting measure, for the Court of Auditors must examine whether all revenue has been received and all expenditure incurred in a lawful and regular manner and whether the financial management has been sound. It has the power to request information and publishes an annual report which is adopted by a majority vote. This is published in the Official Journal along with the response of the institutions. It is often highly critical of the financial management.

The Court of Auditors is meant to present the Parliament and the Council with ‘a statement of assurance as to the reliability of the accounts and the legality and regularity of the underlying transactions’ (Article 287 TFEU).

It was reported in the Times on 5 April 2005 that ‘in the ten years since the independent Court of Auditors was asked to vet annual Union accounts produced by the European Commission, it has not once given them “a positive statement of assurance”, equivalent to a clean audit report’ (writer, Patience Wheatcroft). The situation has not changed in 2010.


In addition, it may publish special reports on particular topics, such as:

food aid

the dairy quota system

agricultural fraud.

Activity 3.6a. Explain the difference between the Council of the EU and the European Council.

b. Explain the composition and role of the European Council.

c. Explain the significance of the Luxembourg Accords.

d. Why does it matter whether voting is by qualified majority or unanimity?

e. Explain how the developing role of the Council and the European Council has weakened the Commission’s role as the initiator of legislation.

f. What is the role of the Court of Auditors?

3.8 The European Central Bank (ECB)

Essential reading Horspool and Humphreys, Chapter 3: ‘The Institutions of the Union’, section 3.60,

pp.69–70.

Craig and de Búrca, Chapter 20(7): ‘Understanding EMU: Central Bank Independence’, pp.738–740.

www.ecb.europa.eu/home/html/index.en.html

Articles 13 TEU, 282–284 TFEU.

The ECB has now been included as an institution and is listed in Article 13 TEU. It was set up by the Maastricht Treaty on European Union to introduce and manage the single currency, the euro, and then to determine and implement the Union’s economic and monetary policy. It is part of the European System of Central Banks (ESCB), the other members of which are the national central banks. This network covers all Member States but only 16 of these are members of the Economic and Monetary Union (EMU). The ECB is located in Frankfurt, Germany.

The ECB has an Executive Board, composed of a President, a Vice-President and four other members. They are appointed by common agreement of the heads of state or government of the Member States and must be recognised experts in monetary matters. There is also a Governing Council, which is made up of the Executive Board and the Governors of the national central banks of the 16 countries participating in EMU.

The independence of the ECB is enshrined in Article 130 TFEU (ex Article 108 EC): the ECB is fully independent of any Member State government or other body.

The Governing Council is the highest decision-making body of the ECB: it defines the monetary policy of the eurozone and is responsible for setting the single interest rate which applies across the area. Article 127(1) TFEU (ex Article 105(1) EC) states that ‘the primary objective of the ESCB shall be to maintain price stability’, and this means that the main task of the ECB and ESCB is to keep inflation under control across the eurozone. Inflation must be held at less than two per cent. The ECB is also instructed to support the general economic policies in the Union with a view to contributing to the achievement of the objectives of the EU (i.e. to attain a high level of employment and sustainable and non-inflationary growth).

The members of the Executive Board of the ECB are appointed for a non-renewable term of eight years.


The ECB has legal personality; it is a semi-privileged applicant for the purpose of actions for judicial review under Article 263 TFEU (ex Article 230 EC) (see Chapter 8); its current President is Jean-Claude Trichet.

3.9 Advisory bodies

Essential reading Horspool and Humphreys, Chapter 3: The Institutions of the Union’,

sections 3.57–3.59, pp.68–69.

Craig and de Búrca, Chapter 2(8): ‘Other Community Institutions’, pp.77-80.

www.eesc.europa.eu/index_en.asp

Articles 283–285, 301–304, 305–309 TFEU.

Economic and Social Committee (ECSC)

The Economic and Social Committee is an advisory body composed of representatives of various categories of social and economic activity, in particular: representatives of producers, farmers, carriers, workers, dealers, craftsmen, professional occupations, consumers and the general interest. Article 301 TFEU (ex Article 258 EC) specifies that the number of members of ECSC is not to exceed 350. At the time of writing, it has 344 members.

It must be consulted by the Council or the Commission, when the EC or the Euratom Treaty so requires. It is also entitled to prepare reports on specific fields on its own initiative.

Committee of the Regions

The Committee of the Regions was set up by the TEU. It consists of representatives of regional and local bodies and, again, has advisory status and must be consulted on legislative proposals when the Treaty requires it. The numbers of the Committee must not exceed 350 and are allocated across the Member States as set out in Article 305 TFEU (Article 263 EC). They are appointed for a renewable four-year term on a proposal from their Member State. They must act completely independently.

Self-assessment questions 1. In regard to the European Parliament, state:

a. when it became directly electable

b. how many MEPs it has

c. its primary functions.

2. In regard to the European Parliament, explain:

a. how MEPs are organised and give the names of one or two of the main political groupings

b. how its powers in the legislative procedures of the European Community have changed from the Treaty of Rome to the present day

c. its role in the consultation procedure, including the significance of the Roquette Frères decision.


Sample examination questions Question 1 ‘Consecutive Treaties have enhanced the role of the European Parliament.’

Discuss.

Question 2 ‘The Union institutions have changed in their relationship to each other since the Treaty of Rome.’

Discuss with reference to two institutions of the European Union.

Advice on answering the questions Question 1 This question requires consideration of the original position of the Parliament and an account of how its powers have been developed through Treaty amendment. If you can refer your account of the expansion of its powers to specified Treaty Articles, that will strengthen your answer. A good answer might mention that it is the role of parliaments to legislate and to scrutinise the executive.

Explain that while the Parliament was one of the four original Community institutions set up by the Treaty of Rome in 1957, it had very limited powers. It was a ‘talking shop’ with its members coming under a dual mandate as members of their national parliaments. Explain Parliament’s limited role in the legislative procedure under the consultation procedure and explain that even that amount of participation was only in limited areas of competence.

You could mention that even at this point, though, the Parliament did have the power to dismiss the Commission by a two-thirds majority under Article 201 EC (now Article 234 TFEU).

The first expansion of its powers was under the two Budgetary Treaties of 1970 and 1975, giving it an important role in the adoption of the budget.

Then came the establishment of direct elections to the European Parliament which transformed its status, making it the only Union institution with a clear democratic mandate.

You should refer to the problem of the ‘democratic deficit’ in the Union and explain that the enhancement of the Parliament’s role is seen as a way of addressing this problem.

Describe the strengthening of the role of the Parliament by the introduction of new legislative procedures, cooperation (SEA), co-decision (TEU), the simplifying (ToA) and extending of co-decision (ToA, ToN) and now the ordinary and special legislative procedures (ToL).

Then address the other ways the Parliament’s role has been strengthened. This question refers to the ‘Treaties’ but even so, you should mention the changes to the Parliament’s status under Article 263 TFEU (ex Article 230 EC) introduced by TEU, adopting the wording of the case law of the Court of Justice. In a question which does not limit itself to changes brought about by the ‘Treaties’ it is essential that you include a section on case law of the Court which has enhanced the position of the Parliament, especially ‘Les Verts’ and Parliament v Council (Chernobyl). Explain that since ToN the Parliament has full privileged status under Article 63 TFEU like the Member States and other institutions.

Mention the other important changes, in particular: development of the Parliament’s role in the appointment of the President of the Commission and the Commission itself; the addition of Committees of Inquiry, the right for citizens to petition the Parliament and the appointment of an Ombudsman by TEU. Also the right to request the Commission to legislate in a particular area and the increasing use of Parliamentary questions to the Commission and the Council. Under the Lisbon Treaty, the President of the European Council is obliged to report to the European Parliament after each of its meetings (Article 15(6)(d) Lisbon TEU).


Summarise by saying that the role of the Parliament has been greatly strengthened since 1957; it is now a co-legislator with the Council and plays an increasing role in supervising the Commission. You could question the degree to which this does address the ‘democratic deficit’ given the low turn-out at European Parliamentary elections.

This would be a first class answer! You will probably not have time to cover all these points.

Question 2 Explain that the powers and functions of the EU institutions were laid down in the original Treaty of Rome but there have since been amendments under successive treaties and you may want to mention that there have also been developments outside the scope of the treaties (for example, the Luxembourg Accords and the establishment of the European Council – if you are considering the Council of the EU). Take care to:

identify which two institutions you are discussing

give an overview of the functions of the two institutions you choose.

Be careful to answer the question.

Parliament/Council Start with an introduction, setting out the functions of the two institutions (the Council is the main legislator for the Community; the Parliament has a legislative and supervisory role).

The European Parliament: legislative powers The main point here is that the European Parliament has become a co-legislator with the Council. Under the scheme of the original Treaty of Rome, the European Parliament had no real legislative power; its sole power was to be consulted by the Council when so required by the Treaty. Even then, its opinion did not have to be accepted (see answer to Question 1 above). In 1957, the Council was the only legislator for the Community.

Then consider the increase in the power of the Parliament in the legislative procedures of the EU as described in Question 1 above, explaining that the implementation of direct elections to the Parliament in 1979 strengthened its democratic credibility.

Mention the problem of the democratic deficit – that the Council is perceived as undemocratic and therefore it is important to strengthen the powers of the European Parliament.

Also explain that the 1970 and 1975 Budgetary Treaties gave the Parliament significant powers in regard to the adoption of the budget, so it now acts with the Council in this important procedure.

The European Parliament: supervisory powers Describe:

how the European Parliament increasingly asks oral and written questions of the Council, so its supervisory role in regard to the Council has been strengthened

that it was given the power to set up committees of inquiry in the TEU

that there is an Ombudsman appointed by the Parliament, whose role is to look into allegations of maladministration by the Community institutions (also established by TEU)

that as the Parliament now has fully privileged status to bring actions for judicial review under Article 263 TFEU (see Chapter 9) it may now test the legality of acts of the other institutions in the courts

that since 1989, the President of the Council is obliged to draw up and present to the Parliament his programme for the presidency


The Council The Council’s powers have been limited by the requirement for co-decision with the Parliament in enacting legislation and adopting the budget. It no longer acts autonomously. Increasingly it can be called to account by the Parliament through the mechanisms mentioned above including the possibility of judicial review actions brought by the Parliament with its fully privileged status under Article 263 TFEU.

Answers are set out below for each pair of institutions, except the Court. You should only answer in regard to one pair!

The voting procedures in the Council itself have changed from unanimity to qualified majority voting which has streamlined decision-making at the expense of the influence of individual countries. Enlargement of the Union has meant that this was essential but qualified majority voting also implies a shift in power to the Commission and Parliament as qualified majority voting relies on alliances and compromises between Member States which can be affected by the other institutions.

ToA saw the implementation of requirements for greater transparency and openness in the Council’s decision-making procedures, and greater access to its documents. This process is likely to continue.

Conclusion The balance of power between the Parliament and the Council has changed, with a significant shift towards the influence and power of the Parliament and greater accountability of the Council to the Parliament. These changes reflect the attempt of the Union to address the democratic deficit. However, the Council remains the most important and dominant institution.

European Parliament/Commission Introduction, setting out the powers and functions of the two institutions (Parliament as above). The Commission is the executive of the Union; it initiates all legislation; it enacts delegated legislation; it is the ‘guardian of the Treaties’ taking actions against Member States in breach of their Union law obligations (Article 258 TFEU) and against undertakings in breach of the rules on competition law.

The European Parliament: appointment and supervision of the Commission The European Parliament was accorded the power to dismiss the Commission under Article 234 TFEU (ex Article 201 EC), by a two-thirds majority, in the original Treaty of Rome of 1957. It has subsequently been accorded other significant powers over the Commission.

Originally the Parliament had no say in the appointment of the Commission but, since the ToA, the Member States nominate the person they wish to appoint as President of the Commission and this appointment is then subject to a vote of approval by the Parliament. Importantly, the European Parliament also votes on the appointment of the Commission as a whole (these powers were added by the Maastricht TEU) but it cannot veto individual Commissioners.

This power was used in 2004. The Parliament, which objected to the appointment of a few individual Commissioners, threatened to vote against the appointment of the Commission as a whole, and the President of the Commission was obliged to withdraw his proposed team of Commissioners and change its membership. You could also mention that the threat of the use of the censure motion under Article 201 EC (now Article 234 TFEU) in 1999 forced the resignation of the Santer Commission. A vote was not actually taken, but after the report of a committee of inquiry that the parliament had set up was made public it became clear that a vote to oust the Commission might succeed and the Commission resigned. More recently, Commissioners-elect have also been withdrawn by their governments after European Parliament hearings.

These events are very significant affirmations of the importance of the European Parliament in its supervisory role over the other institutions.

The Commission must answer questions put to it by the Parliament, and these are increasing dramatically in number.


The European Parliament: legislative powers Since the Maastricht TEU, the European Parliament has had the right under Article 225 TFEU (ex Article 192 EC) to submit a proposal where it thinks legislative action is necessary, although the Commission does not have to act. However, under a Framework Agreement between the two institutions signed in 2000, the Commission has pledged itself to undertake ‘a prompt and sufficiently detailed response’ to such a proposal for legislation.

The European Parliament’s increasing powers as listed above in the adoption of the budget and the legislative procedure have strengthened its importance. The Commission has to take notice of the European Parliament’s views on legislation especially where, as under the ordinary legislative procedure, the European Parliament has the power to veto a legislative proposal.

The Commission The Member States have had their powers of appointment of the Commission, which were originally absolute, subjected to increasing scrutiny and requirement for approval by the Parliament, as detailed above.

The Commission, in its executive role, is also increasingly being called to account for the way it carries out its tasks by the Parliament. This is through increased numbers of parliamentary questions and the use of the powers of appointment/dismissal.

The role of the Commission as the only initiator of legislation has been affected by the granting of powers to the Parliament to ask for legislation to be drafted, although the Commission is not bound to follow this through.

Conclude that the powers of the Parliament in regard to the supervision of the Commission have increased and that its use of these powers has enhanced its status.

So, again, in this relationship between the Parliament and another Community institution, there has been a marked shift in the balance of power towards the Parliament.

Council/Commission Explain the functions of the two institutions (see above). The relationship between them revolves round their relative importance in regard to legislative procedures and legislative initiative, and in setting the agenda for the Union as a whole.

Originally, in 1957, it was envisaged that the Commission should play the central role in the development of the EU. It had the sole right of legislative initiative and also set the legislative programme. It was therefore perceived as the institution which shaped the development of the Union. An important element in the power of the Commission in the original Treaty (and still in force today) was the requirement for unanimity in the Council to amend a Commission proposal. As we have seen, unanimity is not easy to achieve and this prevents the Council ‘tinkering with’ or easily amending Commission proposals. However, a number of developments have affected this central position of the Commission, and interestingly, some of these are outside the formal structures of the Treaties.

The Luxembourg Accords Luxembourg Accords of 1966 were a non-legal agreement (they were never legislated or put into a Treaty) that where a Member State believed that their vital national interests were affected by the legislative proposal, voting was to be by unanimity, thus preserving the national veto. This weakened the Commission’s position as any legislation which it wanted to get through had to be approved by all members of the Council. On the other hand, the Commission has more power in the legislative procedure where qualified majority voting is used, because it can broker deals and create compromises, so the subsequent shift with each new Treaty towards more QMV has increased the Commission’s power in negotiations on legislative proposals.

Initiation of legislation The Council has strengthened its position as regards initiation of legislation, one of the most important powers of the Commission, by an increased use of Article 241 TFEU (ex Article 208 EC) which permits the Council to make proposals for legislation. Unlike the initiatives of the European Parliament, which might not be implemented, the Commission does have to take these proposals seriously. The


wording of the Treaty Article suggests that the proposals should be in general terms but, in practice, the Council may put forward specific proposals and has increasingly done so.

Shaping of the agenda for the Union The development of the position of the European Council has undermined the position of the Commission as the central institution in determining the future constitutional and institutional arrangements for the Union.

State clearly what the European Council is – its composition. The European Council has become the most important body of the Union formulating high-level policy for the EU and instigating initiatives such as EMU or the Social Chapter. It takes the initiative in convening Intergovernmental Conferences (IGCs) to draw up new Treaties. This development, which means that the Member States have taken back control of the Union agenda from the Commission, has happened largely outside the formal structure of the Treaties. The Council has therefore increased its dominance in the Union by keeping control of the overall agenda through the European Council. The European Council has now gained institutional status under the Lisbon Treaty.

The Council’s control over delegated legislation The Commission enacts legislation delegated to it by the Council, but the Council has increased its powers of scrutiny over this process by setting up Comitology – the system of committees of Council appointees who monitor and supervise the enacting of delegated legislation by the Commission.

You could also mention that under the second and third pillars of the EU, the Council and European Council have the leading role; these pillars are inter-governmental and the Commission loses its exclusive power of initiative (any Member State may also put forward a proposal for legislative action) and is merely to be ‘fully associated’ with decisions taken.

Conclude that the development of the Union has seen the Council take a more leading role than that envisaged in the original Treaty, and this has been at the expense of the Commission’s position as the central Union institution.


Reflect and review







Ready to move on


Need to study again

I can state which institutions are listed under Article 13 TEU and explain what their inclusion in this Treaty Article means about their powers.

I can give a brief account of the interaction between the Commission, the Council and the Parliament in regard to the adoption of the budget.

I can describe the European Parliament’s role in the appointment of the Commission and explain how the Parliament exerts control over the Commission.

I can explain how the Parliament’s powers have increased in regard to: legislative procedures; control and supervision of the Commission; control of the acts of the other institutions through participation in judicial review proceedings (in outline only – this is dealt with in detail in Chapter 4).

I can describe the composition of the Commission and how it is appointed.

I can define the functions of the Commission (the details of this will become clearer as you progress through the other chapters).

I can describe the European Council and explain the difference between the European Council and the Council of the European Union and distinguish between these and the Council of Europe.

I can describe the role of the President of the European Union.

I can define and explain the role of the Council of the European Union.

I can describe the role of the High Representative of the European Union.

I can describe how a qualified majority vote (QMV) is reached.

I can explain the significance of the Council Presidency.

I can define the composition and explain the function of COREPER.


I can list the main legislative procedures of the European Union.

I can list the different Treaty Articles which enable cases to be heard before the Court of Justice, stating which are direct actions.

I can explain the role of the Advocate General.

I can describe how the institutional balance of the European Union (formerly the Community) has changed since 1957.


Must revise

Revision done

3.1 The merging of the original institutions

3.2 The European Council

3.3 The European Parliament (EP)

3.4 The Commission

3.5 The Council of the EU

3.6 The Court of Justice of the European Union (comprising the Court of Justice, the General Court and specialised courts)

3.7 The Court of Auditors

3.8 The European Central Bank (ECB)

3.9 Advisory bodies

4 Sources of Union law, legislative acts and procedures

Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .62

4.1 Sources of law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .63

4.2 Legislative procedures . . . . . . . . . . . . . . . . . . . . . . . . . . .66



Introduction

This chapter covers the main binding sources of law, treaties and secondary legislation, as well as other sources, general principles and the case law of the European Courts. The chapter then deals with the legislative procedures which were introduced by successive treaties, giving increasing power (competence) to the European Parliament. Whereas the main legislative power lies with the Council and, increasingly, with the Parliament, the Commission also has a legislative role, in particular acting on delegated powers in the ‘Comitology’ procedure. The Union legal system is based on several sources of law. Union law is not universal, nor can the Union enact any legislation it pleases; its competence is limited to the powers attributed to the Union by the legal texts adopted by the Member States. The principle of this attribution of powers, or conferral, which was first described in Article 5 EC has now been spelt out much more fully in Articles 4 and 5 TEU. Both Articles emphasise that on the one hand under the principle of conferral the Union acts only within the limits of the competences conferred upon it by the Member States, but then state clearly that ‘Competences not conferred upon the Union in the Treaties remain with the Member States’ (Article 5(2) TEU). Article 4(1) repeats this and goes on to spell out the respect of equality of Member States before the Treaties, as well as their national identities, ‘essential State functions’ such as law and order, and particularly emphasising that national security remains the sole responsibility of each Member State. The competences conferred upon the Community and later the Union have grown considerably in strength and extent since the inception of the Union; the field of application of Union law has been widened by each successive Treaty and the Union institutions have received more powers through these Treaties. There is little doubt that through the interpretation of the Union powers by the Court of Justice of the European Union, further extension of their application has occurred. General principles of law which are recognised and applied by the Member States have been used by the Court to underpin the Union legal system.

It should be noted that the EU has exclusive power (competence) to legislate in ever-increasing fields, such as agriculture and the Common Commercial Policy (CCP). In many fields, it has shared competence with the Member States. Once the EU has legislated in these fields, competence moves from the Member States to the Union.

Learning outcomesBy the end of this chapter and the relevant reading, you should be able to:

list the sources of Union law

distinguish between primary and secondary legislation in the Union legal order

identify the legally binding secondary legislation contained in Article 288 TFEU (ex Article 249 EC)

name the non-binding acts mentioned in Article 288 TFEU

define direct applicability

name the main legislative procedures

give a brief account of the consultation and co-decision procedures

also draw on the material you have absorbed from Chapter 3 to explain the role of the European Parliament in these procedures

explain what the principle of conferral is and why it is important, citing the relevant Treaty Article

explain what a ‘Conciliation Committee’ is

explain what ‘Comitology’ is

define subsidiarity and cite the relevant Treaty Article.

EU Law 4 Sources of Union law, legislative acts and procedures page 63

4.1 Sources of law

Essential reading Horspool and Humphreys, Chapter 5: ‘The Union legal system’, sections 5.1–5.31,

pp.103–119.

Craig and de Búrca, Chapter 3(4): ‘Internal Community Competence’, pp.88–95; Chapter 3(5): ‘External Community Competence’, pp.95–100.

Articles 288–299 TFEU (ex Articles 249–257 EC).

4.1.1 Main sources of law The sources of Union law are:

the Treaties (primary legislation)

secondary legislation enacted by the institutions

the case law of the Court of Justice and the General Court

general principles of law recognised by the Court of Justice

international agreements with non-Member States (third countries).

The Treaties (primary legislation)

The Treaties (primary legislation) include:

the ECSC Treaty (expired in 2002)

the EC Treaty

the Euratom Treaty

the Merger Treaty (Convention Establishing a Single Council and a Single Commission of the European Communities)

the first and second Budgetary Treaties

the various Treaties of Accession (see Chapter 2)

the Single European Act

the Treaty on European Union

the Treaty of Amsterdam

the Treaty of Nice

the Treaty of Lisbon, consisting of:

the Treaty on European Union (post Lisbon)

the Treaty on the Functioning of the European Union.

Secondary legislation

Article 288 TFEU (ex Article 249 EC) sets out the secondary legislation of the European Union. The Treaty defines three types of legally binding Acts (Regulations, Directives and Decisions) and two types of Acts that are not legally binding (Recommendations and Opinions).

Although Opinions and Recommendations are not legally binding, they are persuasive. They can be used as an aid to interpretation by the Court of Justice and as such must be taken into account by the national courts.


Regulations

Regulations are directly applicable.† This means that they apply directly in the legal systems of the Member States when legislated by the Union, and automatically incorporated in national legislation. This makes them the most powerful form of secondary legislation and they are used when there is a requirement for exact uniformity.

Note that under the terms of Article 288 TFEU only Regulations are directly applicable. Treaty Articles are not directly applicable. They may be directly effective if they fulfil the van Gend criteria.

The Court of Justice has held that Regulations should be incorporated without change in national legislation by Member States. See: Case 39/72 Commission v Italy (Re Slaughtered Cows) [1973] ECR 101; Case 34/73 Variola v Italian Finance Administration [1973] ECR 981; Case 31/78 Bussone v Italian Ministry for Agriculture [1978] ECR 2429; Case 92/78 Simmenthal SpA v Commission [1979] ECR 777.

This is because the Union nature of the Regulations as part of Union law should not be disguised. This will make it apparent to those who are affected by it that it is subject to preliminary rulings on its interpretation and validity by the European Court. Regulations will also generally have direct effect (see further Chapter 6).

Directives

Directives, on the other hand, must be incorporated (or ‘implemented’) in national legislation in order to have legal effect in the Member States. They set out objectives to be achieved, but leave discretion to the Member States as to the form and method for achieving these objectives. Member States are required to do so by a time limit, which is either specified in the Directive itself, or on the twentieth day after publication in the Official Journal.

There is a problem because Member States frequently fail to implement Directives within the allocated time period. This has an effect on the uniformity of Union law and may also deprive individuals in the defaulting Member States of their Union law rights. In order to address the problem of unimplemented or wrongly implemented Directives, the European Court extended the principle of direct effect (see 26/62 van Gend en Loos [1963] ECR 1) to unimplemented Directives (Case 41/74 van Duyn v Home Office [1974] ECR 1337) which were clear and precise, unconditional and had passed their date of implementation (Case 148/78 Pubblico Ministero v Tullio Ratti [1979] ECR 1629). However, the direct effect of an unimplemented Directive is limited to use against the state (Case 152/84 Marshall v Southampton and South-West Hampshire Area Health Authority [1986] ECR 723) or an emanation of the state (Case 188/89 Foster v British Gas [1990] ECR I-3313). For detailed discussion, see Chapter 6.

There are few acceptable justifications for a Member State’s failure to transpose Directives. The fact that a Directive may have direct effect, that is, that it may be invoked by an individual in a national court, does not excuse a Member State from transposition.

Decisions

Decisions are the third form of binding secondary legislation. They are often addressed to one or more Member State or to a single undertaking, particularly in competition proceedings where the ‘Decision’ of the Commission that an undertaking is in breach of Articles 101 or 102 TFEU is a piece of secondary legislation, approved by the College of Commissioners. It is therefore subject to judicial review proceedings (see Chapter 9).

It should be noted that the Court has held that the title of an Act does not necessarily determine its legal classification. The Court will look to substance rather than form. In Joined Cases 41–44/70 International Fruit v Commission [1971] ECR 411 a piece of legislation that had been enacted as a ‘Regulation’ was held by the Court to be, in fact, ‘a bundle of decisions’.

† It is important that you understand and can define the meaning of ‘directly applicable’.


Other Acts

The Article 288 TFEU list is not exhaustive. The Court of Justice has recognised other types of legally binding Acts. In addition to the Article 288 TFEU Acts, the institutions employ a variety of other Acts, such as Notices and Resolutions, which are usually persuasive rather than legally binding. These are sometimes referred to as acts sui generis, of their own particular kind, which can be binding under certain conditions. The Court has held, for example, that certain Acts of the European Parliament, though not mentioned in Article 288 TFEU (ex Article 249 EC), bind third parties and because they have ‘legal effects vis-à-vis third parties’ are, therefore, judicially reviewable: Case 294/83 Les Verts v EP [1986] ECR 1339. As a result of this case the first paragraph of Article 230 EC (now Article 263 TFEU) was amended to read: ‘and of acts of the European Parliament intended to produce legal effects vis-à-vis third parties.’ In Case 22/70 Commission v Council (ERTA) [1971] ECR 263 a Council resolution was held by the Court to have legal effect.

Case law of the Court of Justice and the General Court

The case law of the European Courts is an important source of law. There is no doctrine of precedent in the European Courts as there is in the English courts. However, preliminary rulings of the Court of Justice must be followed by the national courts under the doctrine of supremacy (see Chapter 6) and the Court generally follows its own case law, referring to its own ‘consistent case law’. If it intends to reverse a previous ruling, it will usually announce very clearly that it is doing so. The Treaty of Rome was a ‘traité cadre’ – a framework treaty – and it was always envisaged that it would be completed not only by secondary legislation but also by case law of the Court of Justice.

General principles of law recognised by the Court of Justice

See further Chapter 5.

International agreements with non-Member States (third countries)

Agreements with third countries are applied by the European Court as an integral part of Union law. They include the following.

Agreements between the Union and one or more third countries. An example is the WTO agreement.

So-called ‘mixed agreements’ between the Union and its Member States acting jointly, on the one hand, and between the Union and third countries, on the other hand. An example is the Lomé conventions between the Union and the African, Caribbean and Pacific (ACP) countries.

Self-assessment questions 1. What are the sources of Union law?

2. Name the three types of secondary legislation which are legally binding.

3. Why does the Court of Justice say that Regulations should not be incorporated in an altered form in the legislation by Member States?

4. Name the two types of ‘Act’ included in Article 288 TFEU which are not legally binding.

5. Explain the difference in the way that Regulations and Directives take effect in the legal systems of the Member States.

Go to your study pack and read the extracts from Case 249/83 Parti écologiste ‘Les Verts’ v European Parliamentand Case 22/70 Commission of the European Communities v Council of the European Communities (European Agreement of Road Transport).Take notes on their significance.


4.2 Legislative procedures

Essential reading Horspool and Humphreys, Chapter 5: ‘The Union legal system’, sections 5.32–5.48,

pp.119–127.

Craig and de Búrca, Chapter 4: ‘Legislation and policy making’, pp.108–143.

Articles 288–292 (ex Articles 249–257 EC).

Although the Commission has the power to initiate legislation, the Council is the main legislative body of the Union. The legislative procedure that applies in any area of European Union competence is set out in the relevant Treaty Article. Under the original Treaty of Rome, the European Parliament’s only power in the legislative procedure was to be consulted when legislation was enacted in limited areas of the Treaty. However, its powers of participation in the legislative process were greatly increased by the introduction of two new legislative procedures:

the cooperation procedure (introduced in the Single European Act and now abolished)

the co-decision procedure, introduced in the Maastricht Treaty on European Union, simplified and expanded in scope by the Treaty of Amsterdam, renamed ‘ordinary legislative procedure’ in Article 289 TFEU and described in detail in Article 294 TFEU (ex Article 251 EC).

The Commission also has limited powers to legislate on its own and it enacts delegated legislation under powers conferred by the Council. This delegated legislation accounts for the greatest volume of Union legislation. It is subject to scrutiny by representatives of the Council under the Comitology procedures. Many different legislative procedures are formalised within the Treaty of Rome and the Treaty on European Union. What follows is an account of the most frequently used procedures in which:

the Council is legislator/Council and Parliament act together to legislate

the Commission is legislator.

4.2.1 The Council as legislator With regard to the Council or Council/Parliament as legislator you need to know about the following procedures.

The Council acts alone.

The consultation procedure and assent procedure, now named: special legislative procedure.

The ordinary legislative procedure (Article 289 and 294 TFEU (formerly co-decision procedure (Article 251 EC)).

Voting requirements

Remember from Chapter 3 that there are different possible voting requirements in the Council. The basic forms are:

simple majority voting (very rarely used)

qualified majority voting, see Chapter 3

unanimity.

Qualified majority voting is now the most commonly used form of decision-making in the Council.


The Council acts alone

The Council acts alone in a number of areas where it can still legislate on a proposal from the Commission without consulting the European Parliament. Examples are:

Article 31 TFEU (ex Article 26 EC) on the Common Customs Tariff

Articles 64(3) TFEU (ex Article 57(3) and 75 TFEU (ex 60 EC) second sentence on free movement of capital

Article 207 (4) TFEU on the common commercial policy.

Special legislative procedures: the consultation procedure

In the consultation procedure, the Council has to consult the Parliament, but it is not obliged to act on its opinion or to give reasons for failing to do so. This procedure usually goes together with unanimous voting in the Council. The Court of Justice has held that failure to wait for the Parliament’s opinion before legislating renders the Act void. In a later case, however, the Court held that if the matter is urgent and the Parliament fails to gives its opinion in reasonable time, the Council may legislate without waiting for its opinion.

Examples of areas where the consultation procedure is used include:

Article 43 TFEU (ex Article 37 EC) Agriculture, visas, asylum and immigration legislation under Title IV [Title IIIa]

Article 113 TFEU (ex Article 93 EC) Indirect taxation

Article 109 TFEU (ex Article 89 EC) State aids

Article 19 TFEU (ex Article 13 EC) Discrimination

Article 148 TFEU: employment policy

Article 352 TFEU (ex Article 308 EC): the residual right to legislate where there is not an appropriate legal base provided elsewhere in the Treaty.

The cooperation procedure (Article 252 EC)

The cooperation procedure was introduced by the SEA and reflected Parliament’s enhanced status after the introduction of direct elections in 1979. This procedure gave the Parliament two readings, and if the Parliament rejected the Council’s proposal, the measure could only be passed by a unanimous vote in the Council. The Treaty of Amsterdam replaced the cooperation procedure with co-decision, except in regard to Economic and Monetary Union. The procedure was then abolished by the Treaty of Lisbon.

The ordinary legislative procedure (formerly co-decision procedure) (Article 294 TFEU, ex Article 251 EC)

The co-decision procedure, now called the ordinary legislative procedure, was introduced by the Maastricht Treaty on European Union and gave the Parliament the power to veto legislation. An outline of the procedure is as follows.

The Commission submits a proposal to the EP (first reading) and the Council.

The EP gives an opinion, which can contain proposed amendments.

If the Council approves all the proposed amendments, or if there are no amendments, it can then decide by QMV to adopt the Act.

If the Council does not like the EP’s amendments or wishes to adopt others, it adopts ‘a common position’. The Council submits its common position to Parliament, with its reasons for this position, and the Commission must also convey its position to the Parliament.

The ‘common position’ replaces the Commission’s proposal as the text that is to be considered.

Go to your study pack and read case 138/79 Roquette Frères v Council of the European Communities [1980] ECR 3333.


The EP now has its second reading. At this point, the Parliament can approve the measure (in which case it is legislated) or veto the measure, in which case it is rejected and falls.

If, instead, the Parliament proposes amendments to the common position, they are sent to the Council with the Commission’s opinion.

The Council can approve the amendments in which case the legislation is passed. This is by QMV or by unanimity if the Commission gives a negative opinion.

If the Council rejects the amendments, a Conciliation Committee is convened. This committee is composed of 27 representatives from the Council – one from each Member State – and 27 MEPs. The Commission is represented at the meetings of the Committee and attempts to reconcile the positions of the Council and the Parliament. The Committee has six weeks to try to reach agreement on a text. If it does approve the text, that is then legislated by the Parliament, acting by an absolute majority of its members, and by the Council, acting by a qualified majority.

The original co-decision procedure in the Maastricht Treaty on European Union was very complex, and it was significantly simplified by the Treaty of Amsterdam. The account above describes the simplified procedure. The ToA also extended the areas to which the co-decision procedure applies, replacing the cooperation procedure in all areas except EMU. Under the co-decision procedure, the Parliament has much enhanced its position of a co-legislator with the Council. The ToN extended its use further and under the Treaty of Lisbon the ordinary legislative procedure is now the usual procedure and the cooperation procedure has been abolished completely.

Amendment of the Commission’s proposal by the Council

Where the Council acts on a proposal from the Commission (as it usually does), unanimity in the Council is required to amend the Commission’s proposal.

The procedures which remain in the Lisbon Treaty but which do not fall under the ordinary legislative procedure are the consultation procedure (described above at 4.2.1), the assent procedure and the budgetary procedure (see Article 254 TFEU which refers to a ‘special legislative procedure’).

The adoption of the budget Article 314 TFEU (ex Article 272 EC)

The procedure described in Article 314 TFEU is complex. A brief, general outline of the procedure is as follows:

All the institutions, with the exception of the European Central Bank, draw up estimates of expenditure, and send them to the Commission which consolidates them into a draft budget.

The draft budget is sent to the Council and the EP.

The Council will adopt a position and forward it to the EP, fully informing the EP of its reasons. If, within 42 days of such communication the EP either adopts the proposal or does not act, the budget is deemed to be adopted. Otherwise, the Conciliation Committee is convened and a complex procedure follows. If within 21 days of the Conciliation Committee being convened there is no agreement, a new budget must be drawn up by the Commission and the procedure followed again.

Article 315 TFEU (ex Article 273 EC) provides that if no budget has been passed at the beginning of the year, a sum equal to one-twelfth of the previous year’s budget may be spent each month. The monthly sums available may be increased by the Council on a proposal by the Commission, in which case the council has to immediately forward the proposal to the EP. The EP has often threatened to use the latter procedure in the past and has done so from time to time; this constitutes considerable power for the EP as regards non-compulsory expenditure. The Lisbon Treaty now extends the EP’s powers so that it has control over the whole of the budget.


Assent procedure

The assent procedure was introduced in SEA. The Council acts after receiving the assent of the EP and legislation can only be passed if they both agree. It applies in a limited number of areas including:

Article 49 TEU: concerning membership of the European Union

Article 127 (6) TFEU (ex Article 105 (6) EC): on the functioning of the European Central Bank.

Self-assessment questions 1. Briefly explain the role of the European Parliament in:

a. the ordinary legislative procedure

b. special legislative procedures (consultation and assent).

2. Which institution initiates legislation?

3. What may happen if the opinion of the Parliament is not given before the Council legislates under the consultation procedure? What is the authority for this?

4. Why has the co-decision procedure become the most widely used procedure, as the name ordinary legislative procedure indicates?

5. What is (a) the composition and (b) the purpose of a ‘Conciliation Committee’?

6. Under which legislative procedures does the Parliament have a veto over legislation?

7. Is it possible for the Council to amend the Commission’s legislative proposal?

4.2.2 The Commission as legislator With regard to the Commission as legislator, there are two types of procedure.

In a very limited number of areas, the Commission has an original power to legislate. Here, the Commission has the power to adopt legislation without intervention from any other institution. The relevant areas include:

Article 106 (3) TFEU (ex Article 86(3) EC) on the role of the state in relation to public undertakings

Article 45 (3) (d) TFEU (ex Article 39(3)(d) EC) on rights of workers to remain after having been employed in a Member State.

The Commission has the power to enact delegated legislation under Article 290 TFEU which authorises the Council to delegate powers to enact legislation to the Commission. Delegated legislation accounts for the greatest proportion of the legislation passed by the Union each year. The Lisbon Treaty lays down specific conditions for delegation, whereas previously such explicit conditions were not present in the EC Treaty (see ex Articles 202 and 211 EC). A legislative act may delegate to the Commission the power to adopt non-legislative acts of general application to supplement or amend certain non-essential elements of the legislative act (Article 290(1) TFEU). Such legislative acts must explicitly lay down the objectives, content, scope and duration of the delegation of power and the conditions to which the delegation is subject. These are called delegated acts and must be distinguished from implementing acts. Measures enacted on the basis of implementing powers conferred on the Commission are called implementing acts (Article 291 TFEU).

‘Comitology’

You may recall the problems with delegated legislation from your Public law course. With delegated legislation, the legislature gives competence to enact delegated legislation to the executive, and there can be problems with scrutiny and control of this delegated legislation. In the Union legal order, a very large percentage of the legislation passed (in terms of volume, not in significance) is legislation enacted by the Commission under powers delegated from the Council.


The Council was not prepared to simply hand over this competence to the Commission, but wished to have some control over the delegated legislation. There are particular problems in the enactment of delegated legislation in the Union legal order because the Commission tends to take a more integrationist approach than the Member States. Different Member States may also have a different view of what the legislation is intended to achieve. The Council therefore established a system of committees made up of representatives of the Member States to oversee the enactment of delegated legislation by the Commission.

This system of committees is called ‘Comitology’. Because there was no express authority in the Treaty for these committees, there was a challenge to their legality. Although the Court upheld the legal validity of the system (Case 25/70 Köster [1970] ECR 1161), Article 202 EC was subsequently amended by the SEA to provide a secure foundation for the control of delegated legislation by the committees. This provided a legal base for the adoption of a framework Decision (Decision 87/373), which established the procedures to be followed by the Comitology committees. The European Parliament was unhappy with its exclusion from the Comitology process. In two cases: Case 302/87 European Parliament v Council [1988] ECR 5615, the ‘Comitology’ case, and Case 70/88 European Parliament v Council (re Chernobyl) [1990] ECR I-2041 (in the first case unsuccessfully, in the second case successfully), the European Parliament asserted its right to bring a case against the Council for its lack of involvement in the decision-making process. (See Chapter 9 for further details.) Decision 87/373 was amended by Decision 1999/468, which, firstly, clarified which types of procedure should be used for which areas of lawmaking and, secondly, increased the role of the Parliament. It also ensured greater transparency in the Comitology process.

The committees in all the three procedures described below are made up of Member State representatives and are chaired by a (non-voting) member of the Commission. Three types of procedure exist:

The advisory procedure The committee delivers an opinion on the Commission’s proposed measure. Although the Commission shall take ‘utmost account’ of the opinion, it is not bound by it.

The management procedureThe Commission’s proposal is given to the committee which delivers its opinion. If the committee does not agree with the Commission’s proposed legislation, the Commission must inform the Council. The Commission may then defer implementation of the measure for three months. During this period the Council may, acting by QMV, decide to enact a different piece of legislation.

The regulatory procedure This procedure gives most power to the committee. The committee must approve the proposal; if it does not or if it fails to give an opinion, the proposed measure is referred back to the Council and the European Parliament for further scrutiny.

A recent proposal has been made to replace this system by something totally different, but details are not yet available.

Requirement to state reasons for legislation: Article 296 TFEU (ex Article 253 EC)

All legislation requires the reasons on which it is based to be stated and the breach of this requirement – or any other procedural requirement – will be grounds for the Court of Justice to declare the legislation void if an action for judicial review is brought. The duty to state reasons includes a reference to the legal basis of the Act – this is the relevant Treaty Article, which gives the competence to act in any particular area. The legal basis is important because it identifies the proper legislative procedure – giving a greater or lesser role to the Parliament depending on which legislative procedure is used. The Parliament will wish to challenge the legality of an act when it believes that the legal base which has been used is incorrect and gives it a lesser role than the correct one. Similarly, a Member State may wish to challenge a piece of legislation

See, for example: Case 45/86 Commission v Council (Tariff Preferences) [1987] ECR 1493; Case C-300/89 Commission v Council (Titanium Dioxide) [1991] ECR I-2867; Case C-155/91 Commission v Council (Waste Directive) [1993] ECR I-939; Case C-84/94 UK v Council (Working time directive) [1996] ECR 1-5759.


enacted by QMV on the grounds that the incorrect Treaty Article has been used and the legislation should have required unanimity.

Increasing attention is now paid to procedural requirements. Particularly serious and manifest procedural deficiencies may render a putative Act non-existent in law. See: Joined Cases T79/89 et al., BASF AG and Others v Commission [1992] ECR II-315; Case C-137/92 P Commission v BASF [1994] ECR I-2555.

The principles of subsidiarity and proportionality Article 5 TEU (ex Article 5 EC)

The principles of subsidiarity and proportionality were added to the European Community legal order by the Maastricht TEU and are contained in Article 5 TEU. They only apply in areas of shared competence, not in areas where the Union has exclusive competence.

The first paragraph of Article 5 TEU confirms that the Union must act within the limits of its competence. The second paragraph sets out the principle of subsidiarity. This states that the Union should act only if:

the objectives cannot be sufficiently achieved by the Member States, and

action can be better achieved by the Union for reasons of scale or efficiency.

The principle of subsidiarity in general states that decisions should be taken at the lowest level possible, as close to the individual as possible. In the Treaty it refers to the relationship between the Member States and the EC and states that, in areas of shared competence, decisions should be taken at the Member State level except where the objectives of the action cannot be sufficiently achieved by action by the Member States and therefore for reasons of scale or efficiency should be dealt with at a Union level. This principle has to be taken into account by the Commission when proposing legislation: it has to justify all proposed legislation with reference to subsidiarity. There has been a reduction in the volume of legislation proposed by the Commission since subsidiarity came into effect which could be a result to its review of proposals with regard to the principle.

The fourth paragraph of Article 5 TEU sets out the principle of proportionality stating that: ‘the content and form of Union action shall not exceed what is necessary to achieve the objectives of the Treaties’. The principle of proportionality is a general principle of Union law, and it finds expression in, for example, the exercise of the derogations to the fundamental freedoms.

The meaning and implications of subsidiarity are clarified in the Protocol on the Application of the Principles of subsidiarity and Proportionality appended to the Treaty of Amsterdam. The Protocol specifically states that legislation can be reviewed for conformity with the principle. The EP and the Council must also examine proposals and their own legislative amendments in the light of the principle.

The Lisbon Treaty now also includes a subsidiarity check by national parliaments who can issue a ‘yellow card’ if they think the principle has not been complied with.

Activity 4.1a. Article 296 TFEU (ex Article 253 EC) requires reasons to be given for legislation.

Who might this be helpful to and why?

b. Explain what the principle of subsidiarity means in a general sense. Explain what it means in the context of Union law. Why do you think it was introduced into Union law? In which Treaty Article is it found?

c. The Protocol on the Application of the Principles of Subsidiarity and Proportionality states that ‘Other things being equal, Directives should be preferred to Regulations… (paragraph 6)’. Why do you think that this was stated in this Protocol?

d. What form of voting procedure is required to amend a Commission proposal? What is the significance of this?


e. Explain the significance of the ‘legal base’ of legislation.

f. When may a Member State wish to challenge the legal base of a legal act?

g. Give an example of when the Parliament may wish to challenge the legal base of an act.

h. Explain why it was significant that the Court of Justice held in Case 70/88 Parliament v Council (Chernobyl) that the Parliament did have standing under Article 230 EC (now Article 263 TFEU) to ask the Court to judicially review legislation under Article 230 EC ‘to protect its prerogatives’.

Sample examination question How has the position of the European Parliament in the legislative procedures of the Union been strengthened by amendments to the Treaty of Rome since 1957?

Advice on answering the questionThis question is a variation of the questions on the changing status of the European Parliament discussed in Chapter 3. It requires: an account of the status of the European Parliament in 1957 under the original Treaty of Rome when it was just a ‘talking shop’ and had only 78 members who were delegates from the national parliaments.

Its only power in the legislative procedure was to be consulted when the ‘consultation procedure’ was required under the Treaty. The Council did not have to take its opinion into account or give reasons for rejecting it, although it did have to wait to receive the Parliament’s opinion (Roquette Frères).

The Budgetary Treaties of 1970 and 1975 gave the Parliament an important role in the adoption of the Community budget and in 1979 its position as the only democratic institution in the Community legal order was confirmed by the establishment of direct elections.

The 1986 SEA introduced the cooperation procedure, giving the Parliament two readings of legislation and requiring unanimity in the Council to pass a measure when it had been rejected by the Parliament. This was an important step in the development of the status of the Parliament, although the cooperation procedure only applied in certain areas of the Treaty and has now been abolished, replaced by the much more effective co-decision procedure.

The Assent procedure was also introduced by the SEA, giving the Parliament a veto in restricted but significant areas such as the accession of new Member States and the signing of Association Agreements.

With the Maastricht TEU the Parliament became a co-legislator with the Council, at last gaining the right to veto legislation. This procedure was simplified, in a way that strengthened the Parliament’s position, by the ToA which also greatly extended its use, including replacing the cooperation procedure by co-decision except in regard to EMU.

Mention should be made of the Conciliation Committee as part of the co-decision procedure.

The essay should conclude by saying that the ToN expanded the use of the co-decision procedure and that the Lisbon Treaty has now turned this into the ordinary legislative procedure so that the European Parliament is now involved as a co-legislator in most of the important decision-making.

It is important to explain that the strengthening of the Parliament’s powers is a way of addressing the democratic deficit at the heart of the Union’s constitutional arrangements.


Reflect and review







Ready to move on


Need to study again

I can list the sources of Union Law.

I can distinguish between primary and secondary legislation in the Union legal order.

I can identify the legally binding secondary legislation contained in Article 288 TFEU (ex Article 249 EC).

I can name the non-binding acts mentioned in Article 288 TFEU (ex Article 249 EC).

I can define direct applicability.

I can name the main legislative procedures.

I can give a brief account of the consultation and co-decision procedures.

I can also draw on the material I have absorbed from Chapter 3 to explain the role of the European Parliament in these procedures.

I can explain what the principle of conferral is and why it is important, citing the relevant Treaty Article.

I can explain what a ‘Conciliation Committee’ is.

I can explain what ‘Comitology’ is.

I can define subsidiarity and cite the relevant Treaty Article.


Must revise

Revision done

4.1 Sources of law

4.2 Legislative procedures


Notes

5 The general principles of EU Law

Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .76

5.1 The initial absence of fundamental rights . . . . . . . . . . . . . . . . .78

5.2 The application of the general principles . . . . . . . . . . . . . . . . .81



Introduction

The first Treaties, the ECSC Treaty (Treaty of Paris) in 1952 and the EEC Treaty (Treaty of Rome) and Euratom Treaty in 1957, did not contain any references to fundamental human rights and early case law of the Court of Justice specifically rejected the inclusion of such rights as part of European Community law (as it was then called). However, the Court of Justice abruptly changed its mind in Case 29/69 Stauder v City of Ulm [1969] ECR 419 and since that time it has added a set of general principles including fundamental human rights, to the European Union legal order. General principles such as Proportionality, Equality or Non-discrimination and Subsidiarity are derived from principles enshrined in the Treaty itself. Fundamental rights are derived from the constitutional traditions of the Member States and international Treaties on human rights, in particular the European Convention on Human Rights.

The general principles, including fundamental rights, apply within the scope of application of EU law and bind the EU institutions and their acts; acts of the institutions and EU legislation of the European Union which are not in accordance with these principles may be annulled. The Court of Justice has also held that the general principles and fundamental rights of EU law bind the Member States when giving effect to, or derogating from, provisions of EU law.

The application of the rights enshrined in these principles has, however, to be balanced against the European Union interest and may be outweighed by it.

The Treaties themselves did finally give recognition to the importance of fundamental rights by the inclusion of a reference to their significance in the Treaty on European Union, the Maastricht Treaty of 1993. A further very important step in the development of human rights was the addition of Article 13 EC (now Article 19 TFEU), the general prohibition of discrimination, to the EC Treaty (as it was then) by the Treaty of Amsterdam in 1997.

At the 1999 Cologne European Council it was decided that a convention would be organised to draw up a Charter of Fundamental Rights of the European Union. The Charter was approved and formally proclaimed by the European Parliament, the Commission and the Council in October 2000 but it was specifically made not legally enforceable.

The Lisbon Treaty has introduced two highly significant changes to the protection of fundamental rights in the European Union legal order. The first is that the ‘Charter of Fundamental Rights and Freedoms’ has been made legally binding and enforceable by the Treaty.

Article 6 TEU:

Article 6(1) The Union recognises the rights, freedoms and principles set out in the Charter of Fundamental Rights of the European Union... which shall have the same legal value as the Treaties. The provisions of the Charter shall not extend in any way the competences of the Union as determined in the Treaties.

There is a Protocol appended to the Treaty which sets limits on the application of the Charter in the United Kingdom and Poland; this is discussed below.

No cases have yet been brought using the Charter directly.

The second change introduced by the Lisbon Treaty is that it gives competence for the accession of the European Union to the European Convention on Human Rights (ECHR). This is a very significant change, not least because it will give the European Court of Human Rights in Strasbourg a final say over the protection of rights in the EU legal order. In 2004, the Court of Justice held in Opinion 2/94, Accession to the European Convention of Human Rights [1996] ECR I-1759, [1996] 2 CMLR 265 that the Community (now subsumed into the European Union by the Treaty of Lisbon, see Chapter 2), did not have competence to accede to the Convention. However the Lisbon Treaty includes a provision giving competence to the European Union to accede (Articles 6(1) and 47 TEU). Before the EU can accede to the ECHR, it must have legal personality, and the necessary competence for this is set out in Article 47 TEU: ‘The Union shall have legal personality.’

EU Law 5 The general principles of EU Law page 77

The provision regarding accession is set out in Article 6 of the TEU:

Article 6(2) The Union shall accede to the European Convention for the Protection of Human Rights and Fundamental Freedoms. Such accession shall not affect the Union competences as defined in the treaties.

Summary The EU human rights enforceable post-Lisbon are:

the general principles, including human rights, recognised in the case law of the Court of Justice. These include the rights from the ECHR but they are enforceable as EU law rights only because the Court of Justice has incorporated them into the EU legal order

the rights protected in the Charter of Fundamental Rights and Freedoms.

After the accession of the EU to the ECHR, the enforceable rights will include the above, plus the rights protected by the ECHR, under the supervision of the European Court of Human Rights in Strasbourg.

Learning outcomesBy the end of this chapter and the relevant readings, you should be able to:

give an account of the development of the general principles, including fundamental rights, in the EU legal order

explain how these rights and general principles were incorporated in EU law

state what the sources of EU fundamental human rights are

give examples of fundamental human rights protected by EU law, citing the relevant cases

list the general principles of EU law, citing relevant case law

explain what is the scope of application of the fundamental rights and general principles

explain what the Charter of Fundamental Rights is and explain its legal status

explain how the Lisbon Treaty has changed the protection of fundamental rights in the EU.

Essential reading Horspool and Humphreys, Chapter 6: ‘General principles of law’, pp.136–174.

Craig and de Búrca, Chapter 11: ‘Human Rights in the EU’, pp.379–427.


5.1 The initial absence of fundamental rights

The Treaty of Rome was originally called the Treaty establishing the European Economic Community. Because its remit was perceived to be the creation of a common market among the six Member States, it was not thought necessary to include any provisions relating to fundamental human rights. In early cases, the European Court of Justice explicitly denied that human rights were part of EC law or that secondary legislation of the EC could be challenged with reference to such rights. See: Case 1/58 Stork v High Authority [1959] ECR 17; Case 40/64 Sgarlata [1965] ECR 215; Cases 36-40/59 Geitling v High Authority [1960] ECR 423.

5.1.1 A change of stanceIn Case 29/69 Stauder v City of Ulm [1969] ECR 419, however, the Court of Justice abruptly changed its stance, and referred to: ‘the fundamental human rights enshrined in the general principles of Community law and protected by the Court’. This was then repeated in a series of cases and the Court of Justice has now incorporated, through its case law, a whole set of fundamental rights and general principles into the EU legal order.

Two interesting early cases were: Case 11/70 Internationale Handelsgesellschaft [1970] ECR 1125 and Case 4/73 Nold [1974] ECR 491.

Internationale Handelsgesellschaft and the affirmation of fundamental rights

In Internationale Handelsgesellschaft, conflict between fundamental human rights protected by the German constitution and EC secondary legislation resulted in a challenge to the supremacy of Community law by the German Federal Constitutional Court. Internationale Handelsgesellschaft had been granted a licence to export a certain quantity of maize within a limited period of time. It was required to pay a deposit which would be forfeit if it failed to export in the allotted time. When the company failed to export within the allocated period, the deposit was forfeited and the applicant then requested the annulment of the Community Regulation on the grounds that it was in conflict with provisions in the German constitution. The German national court held that the deposit system was contrary to principles of national constitutional law, including the principles of freedom of action and of disposition, of economic liberty and proportionality and made a reference to the Court of Justice.

The Court of Justice stated in its judgment that the validity of measures adopted by the Community institutions could not be judged in the light of national law; the validity of Community law could only be judged in the light of Community law. However, the Court went on to consider whether ‘any analogous guarantee inherent in Community law’ had been ‘disregarded’ and repeated that ‘respect for fundamental rights forms an integral part of the general principles of Community law protected by the ECJ’. So it reaffirmed the existence of fundamental rights as part of the Community legal order and looked to see if the rights claimed were protected by European Community law (as it was then, now EU law). The Court concluded that in this case there was no infringement of the fundamental rights protected by European Community law: the requirement for forfeiture was not disproportionate to the general interest that the deposit system served.

However, the German Administrative Court did not agree and referred the matter to the German Federal Constitutional Court. In its judgment the Constitutional Court held that ‘that part of the Constitution dealing with fundamental rights is an inalienable essential feature of the valid Constitution of… Germany’ and that where there was conflict between Community law and such rights ‘the guarantee of fundamental rights in the Constitution prevails…’.

The German Federal Constitutional Court would therefore not accept the supremacy of Community law where there was a conflict between a fundamental right protected by the German constitution and EC law.

This was, then, a serious challenge to the authority of the Court of Justice and to the Community legal order.

Go to your study pack and read the extract from Case 29/69 Erich Stauder v City of Ulm – Sozialamt. Take notes on its significance.

Go to your study pack and read the summary and paragraphs 3–4 of the extract from Case 11/70 Internationale Handelsgesellschaft GmbH v Einfuhr- und Vorratsstelle für Getreide und Futtermittel and paragraphs 13–15 of Case 4/73 J Nold, Kohlen- und Baustoffgroßhandlung v Commission of the European Communities. Take notes on their significance.


The German Court in its judgment referred to the fact that the European Community lacked ‘a codified catalogue of fundamental rights’. The situation was finally resolved in Case 345/82 Re Wünsche Handelsgesellschaft [1984] ECR 1995 (Solange II). In this case, the German Federal Constitutional Court accepted the supremacy of EU law because, by this date, the Court of Justice had incorporated adequate fundamental rights protection into the Community legal order. The German Court said it would accept the supremacy of EU law ‘as long as’ (‘solange’) rights were adequately protected by the Community legal order.

In Frontini v Ministero dell Finanze [1974] 2 CMLR 372, the Italian Constitutional Court accepted the supremacy of Community law only conditionally, stating that it reserved the right to hold fundamental rights protected by the Italian constitution to be supreme over Community law.

The Court of Justice and the Nold case

Since 1969, the Court of Justice has, in a series of important judgments, incorporated ‘general principles’ into European Union law. These consist of:

fundamental human rights

principles of administrative or procedural fairness

other general principles, such as equality and proportionality.

Subsidiarity is also recognised as a general principle of European Union law.

In the Nold case, the Court of Justice made it clear from where it would derive these rights.

Those rights derived from the ECHR have been recognised by the Court of Justice as being part of the fundamental rights protected by EU law by virtue of the fact that the Member States are signatories to the Convention and that these are therefore rights which all the Member States have approved. The Convention rights will be directly enforceable once the EU has acceded to the ECHR. Firstly the Court again stated that ‘fundamental rights form an integral part of the general principles of law, the observance of which [the Court of Justice] ensures…’. It then made clear that there are two sources from which it would derive these rights. The Court would draw inspiration from ‘constitutional traditions common to the Member States’ and also from ‘international treaties for the protection of human rights on which the Member States have collaborated or of which they are signatories’.

5.1.2 Balancing rights against the European Union interest

Scope of rights in Nold

The Nold case demonstrates another important point about the case law of the Court of Justice in regard to fundamental rights – it often takes a restrictive view of the scope of such rights. The facts of Nold were as follows.

A Decision of the Commission authorised the Ruhr coal-selling agency to adopt certain restrictive criteria for its supply of coal. This meant that Nold would no longer be classified as a direct coal wholesaler. The consequence of this was effectively to deprive him of his livelihood.

He claimed that the decision discriminated against him and affected his fundamental rights.

While confirming that fundamental rights were part of the Community legal order (see above) the Court of Justice decided the case against him.

The Court stated that fundamental rights were ‘subject to certain limits justified by the overall objectives pursued by the Community’. This is an important element of the Court’s case law in regard to rights. While recognising fundamental rights, the Court balances them against the European Union interest and will therefore often find against the applicant.


In this case, it held that such rights ‘can in no respect be extended to protect mere commercial interests or opportunities, the uncertainties of which are part of the very essence of economic activity. The disadvantages claimed by the applicant are in fact the result of economic change and not of the contested decision.’

The Court of Justice will often recognise the existence of a right but then balance it against the European Union interest. A case which illustrates this is: Case 44/79 Hauer v Land Rheinland-Pfalz [1979] ECR 3727.

The Hauer case

Ms Hauer lived in Germany. She challenged a refusal by the national authorities to grant permission to grow vines on her land. This refusal was based on an EEC Regulation which prohibited growing new vines in the region in which she lived. She appealed to the German court which made a referral to the Court of Justice. Ms Hauer argued that the refusal of permission to grow vines on her own land infringed her rights to trade and to property.

The Court of Justice acknowledged that these rights were part of Community law. It grounded its recognition of the right to property in the first protocol of the ECHR stating that international treaties ‘can supply guidelines which should be followed within the framework of Community law’.

However the Court of Justice then denied that the right to property had been impermissibly infringed in this case. It pointed out that although rights to property were recognised in the constitutions of several Member States, such rights were not absolute but could be restricted in the national interest. The Court looked to see if the planting restrictions were disproportionate. It considered the purpose of the scheme under which the Regulation had been legislated. This was to produce a balanced wine market with fair prices for consumers, a fair return for production and an eradication of surpluses of the rather inferior type of wine which was produced in this area of Germany. The Court decided that the challenged Regulation prohibited new plantings as part of this overall plan and that this was justified and proportionate in the light of the legitimate aims of Community policy.

This is a good example of the Court of Justice using the ECHR as a source for a fundamental right, yet in the same case, balancing the right against the Community interest and denying that the right had been unlawfully infringed in the particular case.

At this time, the European Union was not a signatory to the ECHR, and the Court of Justice used the Convention only as evidence of principles to which all the Member States have subscribed.

Note that other international treaties on human rights are also sources for the Court, in particular the Convention of the ILO (International Labour Organisation) and the European Social Charter of 1961. These are both treaties to which all the Member States have acceded.

In conclusion, the Court of Justice has drawn on the legal systems of the Member States and international treaties to which they are all signatories – such as the ECHR – as sources for these rights and principles.

Go to your study pack and read paragraphs 14 and 17–30 of the extract from Case 44/79 Liselotte Hauer v Land Rheinland-Pfalz.Take notes on its significance.


5.2 The application of the general principles

The general principles and fundamental rights recognised by the Court can be enforced by individuals, including legal persons, against acts of the EU institutions or EU legislation which breach such rights. These rights can also be enforced against the Member States when they implement or derogate from EU law (see next section, below). They do not apply across all national law.

5.2.1 Application by Member StatesThese general principles also bind the Member States when they are implementing European Union law or derogating from the fundamental freedoms of EU law.

In Case 260/89 ERT v Dimotiki Etaira Pliroforissis [1991] ECR I-2925 ERT was a broadcasting company to which the Greek government had granted an exclusive right to transmit television and radio programmes. It took action against two respondents who had set up a television station in competition with them. The respondents claimed that the grant of an exclusive right to broadcast infringed Article 10 of the ECHR, freedom of expression, as well as the free movement of services and competition rules.

ERT relied on derogations from free movement under Articles 52 and 62 TFEU (ex Articles 46 and 55 EC).

The Court of Justice ruled that although it had no jurisdiction to examine the compatibility of national rules with the ECHR, where national rules fall within the scope of European Union law they may be reviewed by the Court of Justice to ensure their compatibility with the fundamental rights protected by Union law. Here, ERT was relying on derogations granted by the Treaty and therefore the matter was within the scope of EU law. The Court of Justice held that ‘the national rules in question can fall under the exceptions provided for by the combined provisions of Articles 46 and 55 EC [now Articles 52 and 62 TFEU] only if they are compatible with the fundamental rights, the observance of which is ensured by the Court’.

This is an important principle, making it clear that the actions of the Member States when giving effect to, or derogating from European Union law, will also be subject to scrutiny for compliance with EU fundamental rights and general principles.

5.3 Fundamental human rightsFundamental human rights are considered in: Case 46/79 Hauer v Land Rheinland-Pfalz [1979] ECR 3727 and Case 130/75 Prais [1976] ECR 1589.

In Case 112/00 Schmidberger v Austria [2003] ECR I-5659, the Court of Justice held that freedom of expression and freedom of assembly, as derived from the ECHR, are fundamental rights protected by the Court of Justice. These rights could be used as a justification for obstacles to free movement of goods (contravening Article 34 TFEU, ex Article 28 EC) as long as the methods used were proportionate.

5.3.1 Proportionality, legal certainty and equalityC-36/02 Omega Spielhallen v Bonn [2004] ECR I-9609 concerned a company, Omega, which franchised a game which was a form of ‘paint-balling’ from a company called Pulsar in the UK. Paint-balling consists of players wearing special sensory jackets so that when other people hit them with ‘paint-ball’ guns, it is recorded as a ‘hit’ or a ‘kill’. The Bonn authorities (in Germany), issued a prohibition order, on the basis that by simulating murder, it infringed the right to human dignity, protected by paragraph 1(1) of the German Basic Code (the German constitution).

The Court of Justice held that although this was a restriction of the right to provide services, it could be justified under the public policy exception as ‘the Community legal order undeniably strives to ensure respect for human dignity’, as long as the measures taken were proportionate. It was not necessary that all the Member States should take the same view as to the precise way that a fundamental right, such as

Go to your study pack and read paragraphs 68–77 of the extract from Case C-112/00 Eugen Schmidberger v Republik Osterreich.Take notes on its significance.

Go to your study pack and read paragraphs 32-41 of the extract from Case C-36/02 Omega Spielhallen- und Automatenaufstellungs GmbH v Oberbürgereisterin der Bundesstadt Bonn.Take notes on its significance.


the protection of human dignity, should be protected. As the contested order only prohibited the variant of the laser game in which the object is to fire on human targets and thus ‘play at killing’ people, the contested order did not go beyond what is necessary in order to attain the objective pursued by the competent national authorities.

See also Case C-60/00 Carpenter [2002] ECR I-9607 (discussed in Chapters 12 and 13) and Case C-413/99 Baumbast v Secretary of State for the Home Department [2002] ECR I-709 on the right to family life; both these cases concern the scrutiny of actions of a Member State (the UK in both cases) within the scope of application of the Treaty.

Proportionality

Proportionality is also addressed in: Case 114/76 Bela-Mühle [1977] ECR 1211 and Case 181/84 R v Intervention Board ex p Man Sugar (Ltd) [1985] ECR 2889.

Legal certainty: non-retroactivity and legitimate expectations

Legal certainty is addressed in: Case 63/88 R v Kirk 1984 ECR 2684 (non-retroactivity) and Case 112/77 Toepfer v Commission [1978] ECR 1019 (legitimate expectations).

Equality

The principle of equality means, in its broadest sense, that persons in similar situations may not be treated differently, unless the difference in treatment is objectively justified.

There are particular provisions in the Treaty prohibiting discrimination:

Article 18 TFEU (ex Article 12 EC): on the grounds of nationality

Article 157 TFEU (ex Article 141 EC): on the grounds of sex with reference to pay

Article 40(2) TFEU (ex Article 34 (2) EC): between producers or consumers within the Union.

A general principle of equality, which is wider in scope than these provisions, has also been developed by the Court. See: Case 103 and 145/77 Royal Scholten Honig v Intervention Board [1878] ECR 2037 and Case 13/94 P v S and Cornwall County Council [1996] ECR I-2143. The Treaty of Amsterdam included a new Article (now Article 19 TFEU), which gives a legal base for the European Union to take action to combat discrimination. Two Directives have been legislated on this legal base (see Chapter 14): Directive 2000/78 and Directive 2000/43.

A highly significant case in regard to discrimination on the grounds of age is Case C-144/04 Werner Mangold v Rüdiger Helm [2005] ECR I-7181. Although the case concerned a challenge to German law in contravention of Directive 2000/78/EC (prohibition on discrimination in employment in regard, inter alia, to age, see Chapter 14) which had not yet passed its date for implementation (see Chapter 6 on direct effect), the Court of Justice stated that the principle of non-discrimination on grounds of age was to be regarded as a general principle of European Union law.

5.3.2 Procedural rightsProcedural rights are covered in: Case 155/79 AM&S. Europe Ltd v Commission [1982] ECR 1575 (this case illustrates that a right does not have to be recognised in all, or even a majority of, Member States for it to be included as one of the fundamental rights by the Court of Justice) Case 17/74 Transocean Marine Paint v Commission [1974] ECR 1063; Case 73/74 Groupement des Fabricants des Papiers Peints de Belgique v Commission [1975] ECR 1491 (duty to give reasons under Article 253 EC); Case 374/87 ORKEM v Commission [1989] ECR 3283, [1991] 4 CMLR 502.

The general principles of law as developed by the Court of Justice can be used as grounds for judicial review to challenge European Union legal acts under Article 263 TFEU (ex Article 230 EC). They are often used as a basis to challenge the Commission’s decisions under the competition law procedures.

Go to your study pack and read the extracts from Case C-13/94 P v S and Cornwall County Council and C-249/96 Lisa Jacqueline Grant v South West Trains Ltd. Take notes on their significance.

Go to your study pack and read the extract from Case 144/04 Werner Mangold v Rüdiger Helm.Take notes on its significance.

Go to your study pack and read the extract from Case C-155/79 AM&S Europe Ltd v Commission of the European Communities.Take notes on its significance.


5.3.3 The European Convention on Human Rights (ECHR)In 1994, the Court of Justice decided that the European Community did not have competence to accede to the ECHR. See: Opinion 2/94, Accession to the European Convention of Human Rights [1996] ECR I-1759, [1996] 2 CMLR 265.

The Lisbon Treaty includes a specific competence to accede to the ECHR in Article 6 TEU (post-Lisbon).

Art 6(2) The Union shall accede to the European Convention for the Protection of Human Rights and Fundamental Freedoms. Such accession shall not affect the Union competences as defined in the treaties.

It is first necessary that the European Union acquire legal personality (the EC did have legal personality, but the EU does not), and the way is paved for this to happen by Article 47 TEU: ‘the Union shall have legal personality.’

Article 6(3) continues that ‘Fundamental rights, as guaranteed by the European Convention for the Protection of Human Rights and Fundamental Freedoms and as they result from the constitutional traditions common to the Member States, shall constitute general principles of the Union’s law’. This gives formal recognition to the existing case law of the Court of Justice in this area.

Article 2 TEU has been rewritten by the Lisbon Treaty and now reads as follows:

The Union is founded on the values of respect for human dignity, freedom, democracy, equality, the rule of law and respect for human rights, including the rights of persons belonging to minorities. These values are common to the Member States in a society in which pluralism, non-discrimination, tolerance, justice, solidarity and equality between men and women prevail.

Article 7 TEU – added by the Treaty of Amsterdam – enables the Council to suspend the rights of a Member State found to be in ‘serious and persistent breach’ of the values enshrined in Article 2 TEU.

In 2002, partly in response to the need to monitor the necessity for application of Article 7 TEU, the EU Network of Independent Experts on Fundamental Rights was set up by the European Commission at the request of the European Parliament. It monitors the situation of fundamental rights in the Member States and the Union, on the basis of the Charter of Fundamental Rights (see below) and issues reports, as well as opinions, on specific issues related to the protection of fundamental rights in the Union.

The European Union Agency for Fundamental Rights (FRA) was created in 2007 by Council Regulation 168/2007, replacing the European Monitoring Centre on Racism and Xenophobia (EUMC). It is based in Vienna. Its objective is ‘to provide the relevant institutions and authorities of the Community and its Member States when implementing Community law with assistance and expertise relating to fundamental rights in order to support them when they take measures or formulate courses of action within their spheres of competence to fully respect fundamental rights’. Its mandate includes the fight against racism, xenophobia and related intolerance. Its tasks include the collection, analysis and dissemination of objective, reliable and comparable information on the development of fundamental rights in the EU and raising public awareness of fundamental rights.

Self-assessment questions 1. Were there any fundamental rights in the Treaty of Rome in 1957?

2. In which case were they first referred to as part of the EU legal order by the Court of Justice?

3. Give examples of fundamental rights, citing relevant case law.

4. Name three of the general principles, citing relevant case law.


Activity 5.1 a. Give an account of the sources of fundamental rights in the EU.

b. If you wished to draw up a list of the legally binding fundamental rights of the EU, where would you find them?

c. Are these rights listed in the Treaties?

d. State the facts of Hauer. Did the Court of Justice think that Ms Hauer had the rights that she claimed? Did she succeed in her case?

5.3.4 The Charter of Fundamental RightsThe 1999 Cologne European Council decided that a Charter of Fundamental Rights of the European Union should be drawn up in order to make their overriding importance and relevance more visible to the Union’s citizens.

The task of drawing up the Charter was entrusted to a ‘Convention’ composed of:

15 representatives of the Heads of State or Government (representing each of the Member States that were part of the EU at that time)

15 members of the European Parliament

30 members of national parliaments (two from each Member State)

one member of the Commission, representing the President of the Commission.

The Charter was ‘proclaimed’ by the Council, the European Parliament and the Commission.

The Charter has, as discussed above, been made legally enforceable by the Lisbon Treaty Article 6(1) TEU. It is to have ‘the same legal value as the Treaties’.

Even before Lisbon, it had been cited many times by Advocates General in their Opinions.

The Court of First Instance (CFI) also cited the Charter to support its judgments in a number of cases. An example is Case T-177/01 Jégo-Quéré, in which the CFI criticised the existing tests for locus standi (standing – the right to bring an action for judicial review) for individual applicants under Article 263 TFEU (ex Article 230 EC), stating that the test was not in accordance with the established EU law right to an effective remedy before the courts. The CFI stated that this right had been developed by the Court of Justice, based ‘on the constitutional traditions common to the Member States and on Articles 6 and 13 of the ECHR’, but continued that ‘the right to an effective remedy for everyone whose rights and freedoms guaranteed by the law of the Union are violated has been reaffirmed by Article 47 of the Charter of Fundamental Rights of the European Union proclaimed at Nice on 7 December 2000’ (paragraph 42).

The Court of Justice overruled the CFI’s judgment in this case (Case 263/02 Commission v Jégo-Quéré [2004] ECR I-3425).

A noteworthy Opinion of an Advocate General relying on the Charter of Fundamental Rights as a basis for his decision, is Advocate General Tizzano’s Opinion in the Case 173/99 R v Secretary of State for Trade and Industry ex parte BECTU [2001] ECR I -4881.

The Court of Justice relied on the Charter in a judgment for the first time in Case C-540/03 European Parliament v Council [2006] ECR I-5769.

In Case C-341/05 Laval un Partneri Ltd v Svenska Byggnadsarbetareförbundet Judgment of 18 December, 2007 (see Chapter 13 for detailed discussion) the Court of Justice held that the right to take collective action (to strike), reaffirmed by the Charter of Fundamental Rights and Freedoms, must be recognised as a fundamental right.

The Charter is applicable (as are the rights currently derived from case law) to the institutions of the EU and the Member States when implementing EU Law.


The rights enumerated in the Charter are wider than those under the European Convention on Human Rights, including, for instance, the rights of minorities to special protection, and it includes social and economic rights.

Article 53 of the Charter makes it clear that nothing in the Charter can be interpreted so as to lower existing protection of rights under EU law, the Member States’ constitutions or international law including the ECHR.

There is a Protocol on the application of the Charter appended to the Lisbon Treaty which clarifies that no new legal rights will be created by the Charter in the United Kingdom or Poland. It was agreed at the European Council meeting held in October 2009 that this Protocol will also apply to the Czech Republic but this has not yet been given legal effect.

Protocol on the Application of the Charter of the charter of Fundamental Rights of the European Union to Poland and to the United Kingdom

Article 1

The Charter does not extend the ability of the Court of Justice of the European Union, or any court or tribunal of Poland or of the United Kingdom, to find that the laws, regulations or administrative provisions, practices or action of Poland or of the United Kingdom are inconsistent with the fundamental rights, freedoms and principles that it reaffirms.

In particular, and for the avoidance of doubt, nothing in Title IV of the Charter creates justiciable rights applicable to Poland or the United Kingdom except in so far as Poland or the United Kingdom has provided for such rights in its national law.

Article 2

To the extent that a provision of the Charter refers to national laws and practices, it shall only apply to Poland or the United Kingdom to the extent that the rights or principles that it contains are recognised in the law or practices of Poland or of the United Kingdom.

Rights recognised in the Charter of Fundamental Rights

Rights to human dignity (Articles 1–5) right to life

integrity of the person

prohibition of torture or inhuman and degrading treatment

prohibition of slavery or forced labour

prohibition on cloning or eugenics.

Freedoms (Articles 6–19) right to liberty and security

respect for private and family life

protection of personal data

right to marry and found a family

freedom of thought, conscience and religion

freedom of expression and information

freedom of assembly

freedom of the arts and sciences

right to education

freedom to choose an occupation and right to engage in work

freedom to conduct a business

right to asylum

right to property.


Equality (Articles 20–26) equality before the law

non-discrimination on sex, race, colour, ethnic or social origin, genetic features, language, religion or belief or political opinion, disability, sexual orientation, birth

cultural, religious and linguistic diversity

equality between men and women

rights of the elderly, integration of persons with disabilities.

Solidarity workers’ right to information and consultation

right of collective bargaining

protection in the event of unfair dismissal

right to placement services

fair and just working conditions

prohibition on child labour

right to social security

right to healthcare

protection of the family

high level of environmental and consumer protection

access to services of general economic interest.

Citizens’ rights right to vote and stand in municipal and European Parliament elections

right to good administration

right to access to documents

right to refer matters to European Parliament and petition Ombudsman

freedom of movement and residence

right to diplomatic protection.

Justice right to an effective remedy and a fair trial

presumption of innocence

right not to be tried or punished twice for same offence

principle of non-retroactivity and proportionality.

Activity 5.2 a. What is the legal status of the Charter of Fundamental Rights?

b. Does the EU need a Charter of Fundamental Rights?

c. Write a plan of the answer to this question, explaining what information is necessary to give a comprehensive answer.


Sample examination questionsQuestion 1 Non-discrimination has been developed into a general principle of European Union law. Describe its development focusing on the role of the Court of Justice.

Question 2 What are the general principles of law that the Court of Justice has developed? How does the Court apply them?

Advice on answering the questionsQuestion 1 This question requires a discussion of:

the principle of non-discrimination which underpins the Treaty as a whole (Article 18 TFEU, ex Article 12 EC) which manifests itself in the free movement of goods, services and persons

those Treaty Articles which prohibit discrimination: Article 40(2) TFEU (ex Article 34 (2) EC) (no discrimination between producers or consumers within the Community) and Article 157 TFEU (ex Article 141 EC) (equal pay for equal work) and Article 19 TFEU (ex Article 13 EC)

the case law in which the Court of Justice has interpreted Article 157 TFEU (ex Article 141 EC) and the Equal Treatment Directive (Dir. 76/207) in a very expansive manner

the case law covered in this chapter in which the Court of Justice has developed the general principle of non-discrimination (or equality).

This subject is discussed in depth at the end of Chapter 13.

Question 2 This question should start off with an introduction explaining that in the original Treaty of Rome there were no fundamental rights or general principles and that the Court of Justice has subsequently incorporated a whole set of general principles and fundamental rights through its case law.

Mention should be made of the early case law where the Court of Justice denied that fundamental rights were part of the European Union legal order. The Court of Justice then changed its stance in the Stauder v Ulm case and the existence of fundamental rights and general principles were then confirmed in Nold and Internationale Handelsgesellschaft. These cases also explain the sources from which the Court of Justice derives these principles: the constitutional traditions of the Member States and treaties on human rights, in particular, the ECHR.

It is important to state what the various general principles are, including fundamental rights, giving examples from case law.

It is then necessary to answer the second part of the question, asking how the Court applies these principles.

The Court of Justice applies these principles within the scope of application of European Union law and when Member States are giving effect to EU law, or derogating from provisions of the Treaty (ERT).

It should be explained that the Court may balance the fundamental right or general principle against the European Union interest (Hauer).

You should then mention the very significant changes brought about by the Treaty of Lisbon in regard to the legal enforceability of the Charter and the accession of the EU to the ECHR in the future.


Reflect and review







Ready to move on


Need to study again

I can give an account of the development of the general principles, including fundamental rights, in the EU legal order.

I can explain how these rights and general principles were incorporated in EU law.

I can state what the sources of EU fundamental human rights are.

I can give examples of fundamental human rights protected by EU Law, citing the relevant cases.

I can list the general principles of EU law, citing relevant case law.

I can explain what is the scope of application of the fundamental rights and general principles.

I can explain what the Charter of Fundamental Rights is and explain its legal status.

I can explain how the Lisbon Treaty has changed the protection of fundamental rights in the EU.


Must revise

Revision done

5.1 The initial absence of fundamental rights

5.2 The application of the general principles

5.3 Fundamental human rights

6 Union law and national law

Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .90

6.1 The doctrine of direct effect . . . . . . . . . . . . . . . . . . . . . . . .91

6.2 Indirect effect of Directives . . . . . . . . . . . . . . . . . . . . . . . .96

6.3 Remedies for Union law rights . . . . . . . . . . . . . . . . . . . . . . .98

6.4 Action for damages against a Member State for breach of Union law . . . 100

6.5 The supremacy of EU law . . . . . . . . . . . . . . . . . . . . . . . . 103

6.6 EU law from the Member States’ perspective . . . . . . . . . . . . . . . 104

Reflect and review . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110


Introduction

Some of the most difficult and controversial questions in Union law concern the relationship between Union law and the law of the Member States. This chapter deals with the ways in which Union law is applied and enforced within the national courts, and the ways in which individual EU citizens can enforce their Union law rights. The Treaty of Rome reflects the civil law tradition of the majority of Member States and is what is described as a ‘traité cadre’ (framework treaty) which means that it was intended to be interpreted and filled out by secondary legislation and case law of the European Court of Justice. The European Court has indeed played a very important role in the development of the Community and the Union. In its judgments it often takes a ‘teleological’ or purposive approach. This is different from the literal approach mostly used by the English courts, although they too use the purposive approach, but the creativity of the Court of Justice using a purposive approach goes very much further than that of the UK courts.

Using the teleological approach, the Court of Justice looks at the preamble of Treaty and to its aims and objectives as set out in Article 3 TEU and draws on these principles to determine the outcome of its cases. Two other principles underlie its case law: the requirement of effectiveness, often used in the French term effet utile, and the requirement for the uniform application of Union law in all the Member States. The use of these principles has led to case law which is sometimes surprisingly creative.

The Court may refer to the spirit of the Treaty or to principles inherent in the system of the Treaties to develop new doctrines and it has not hesitated to rewrite the Treaty on occasion. For example, it has included human rights and general principles as part of the Union legal order, something which was never mentioned in the original Treaty of Rome (EEC Treaty). In this chapter we will be discussing how the Court has used the approach described above in its case law concerning the rights of individuals, giving the maximum possible effect to Union law. The most important cases in this respect will be discussed.

Essential reading You should read at least one of the following:

Horspool and Humphreys, Chapter 7: ‘Doctrines of European Union Law: direct effect, supremacy, state liability for breach of Union law and other remedies’.

Craig and de Búrca, Chapter 8: ‘The nature and effect of EC law’, pp.268–303; Chapter 9: ‘The application of EC Law: remedies in national courts’, pp.305–342; Chapter 10: ‘The relationship between EC law and national law: supremacy’, pp.344–377.


explain the impact of Union law on the national legal systems of Member States

explain how the basic principles governing the relationship between Union and national law (direct effect, indirect effect, supremacy and state liability for breach of Union law) have developed and critically evaluate the legal basis of those principles

evaluate the role of the Court of Justice in developing those principles through the concepts of effectiveness, integration and uniformity

compare the requirements for the enforcement of individual Union law rights under the doctrines of direct effect, indirect effect and state liability

apply these doctrines to problems, advising on the remedies available, and the limitations on those remedies

explain the obligations of the Member States’ authorities (especially national courts) in enforcing Union law.

EU Law 6 Union law and national law page 91

6.1 The doctrine of direct effect

Essential reading Horspool and Humphreys, Chapter 7(I): ‘Direct applicability and direct effect’,

sections 7.1–7.13, pp.175–184.

Craig and de Búrca, Chapter 8: ‘The nature and effect of EC law’, pp.268–303.

6.1.1 Direct effect The principle of direct effect is not found in the Treaty but has been created and developed by the European Court in a series of judgments. It has greatly increased the impact of European Union law within the Member States. Direct effect means that, subject to certain conditions, Union law creates rights and obligations which individuals may rely on and enforce in their national courts.

Arguably the most important case in Union law is Case 26/62 van Gend en Loos v Nederlandse Administratie der Belastingen [1963] ECR I. In this case the Court decided that an individual could rely directly on a Treaty Article and enforce it in his own national court although the Treaty Article had not been legislated into the Member State’s legal system. This is called the principle of ‘direct effect’. Normally the question of the operation of an international treaty in the domestic legal system is determined by the constitutional law of the individual country concerned. In this case, the Court of Justice decided that it had jurisdiction to decide the effect of the Treaty of Rome on a Dutch citizen. Nothing is said in the Treaty about the effect of Treaty Articles on individuals, and it looked as if the only way that individuals could use EU law to enforce their rights was by leaving it to the Commission and the Member States to do so. However, in van Gend en Loos the Court addressed this problem and at one stroke transformed the legal status of the Treaty from a conventional, if far-reaching, Treaty governed apparently by the normal rules of international law, into the foundation of a sui generis ‘new legal order’ that would operate directly for the benefit of the citizens of the signatory states.

The facts of the case took place in the first stage of the establishment of the EEC when customs duties had not yet been abolished but where there was a clear prohibition in Article 12 of the EEC Treaty (now Article 30 TFEU) of any increase in customs duties.

Van Gend en Loos was a company importing urea formaldehyde (a kind of glue) from Germany into the Netherlands, where a customs duty was imposed. In 1958, when the EEC Treaty came into force, the duty on this product was fixed at 3 per cent under an existing Benelux Customs agreement. Despite the prohibition on increases of customs duties, the Dutch government in 1959 entered into an additional Protocol which re-classified the product, which had the effect of increasing the duty on it to 8 per cent. The company, van Gend en Loos, forced to pay this increased duty, brought an action challenging the legality of the increase under Community law in the Amsterdam Customs Court, the Tariefcommissie. The Dutch court made a preliminary reference to the Court of Justice (see Chapter 7).

The first (and most important) question asked by the Tariefcommissie was whether Article 12 EEC had an effect within the territory of a Member State. On the basis of this Article, could citizens of the Member States enforce individual rights which courts of the Member States must protect?

In other words: the question asked what was the effect of the EEC Treaty on national law and whether an individual could enforce the provisions of the Treaty directly in his/her national court. The Belgian and Dutch government argued forcefully that this was a matter of national constitutional law. The Netherlands government claimed in these proceedings that ‘the EEC Treaty does not differ from a standard international Treaty’. The Advocate General gave an Opinion much along those lines, stating that the individual was afforded sufficient protection in (what are now) Articles 258, 259 and 261 TFEU.

The Court, however, disagreed with the Advocate General and in a ground-breaking judgment stated:


The Community constitutes a new legal order of international law for the benefit of which the States have limited their sovereign rights, albeit within limited fields, and the subject of which comprise not only the Member States but also their nationals... It follows from the foregoing conclusions that, 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.

6.1.2 The need for direct effect Direct effect, whereby an individual can enforce provisions of Union law, initially Treaty Articles, directly in their own national courts, was essential if the Union legal order was to be effective. In van Gend the Court held that an Article of the EEC Treaty could have direct effect if it was:

clear and precise

unconditional

its operation did not require a legislative implementing measure on the part of the State.

If those conditions were fulfilled, individuals could enforce the Article directly in their national court. This was a right conferred on individuals ‘in addition to the supervision entrusted by Articles 169 and 170 [now Articles 258 and 259 TFEU] to the diligence of the Commission and of the Member States’. It should be noted that until the Maastricht Treaty in 1993 there was no sanction against a Member State which failed to remedy the breach after the Court had declared it to be in breach under Article 258, other than the possibility to bring the Member State before the Court of justice once again.

It was said that the judges in this case had ‘une certaine idée de l’Europe’ (a particular idea of Europe) and that it is this idea which has been decisive and not arguments based on legal technicalities. In van Gend en Loos, the Court also imposed a fourth condition – that the Article must lay down a negative prohibition rather than a positive obligation – but this condition was dropped in later cases: see 57/65 Alfons Lütticke GmbH [1966] ECR 205.

Even the remaining three conditions, which suggest that provisions with direct effect will be the exception rather than the rule, have been whittled away. A provision which is ‘conditional’ on some objective circumstance or factor, for example, can be applied by a court because the court can determine whether or not that circumstance or factor is present. Only provisions which are conditional in the sense that they confer a discretionary power on a third party (e.g. on the Member States or the Commission) would be excluded from having direct effect – because the national court cannot usurp that discretion.

Similarly, the requirement that a measure must not be dependent on further action is not the obstacle that it, at first, appears. This is because, whenever the Treaty (or other measure) includes a time-limit within which such further action should take place, the Court has held that, once that time-limit has expired, the measure has direct effect: see Case 43/75 Defrenne v SABENA [1976] ECR 455.

The central idea, then, is whether a provision is capable of being applied by a national court (whether it is ‘justiciable’). Even a lack of clarity will not necessarily prevent direct effect – because the national court can seek clarification from the Court of Justice through the Article 267 TFEU preliminary reference procedure if necessary. As a result, direct effect of Treaty provisions has become the norm, rather than the exception. Below, we look at how the doctrine operates in relation to the various kinds of Union measures.

Activity 6.1 Read the judgment in van Gend en Loos and examine the Court’s reasoning. Define ‘direct effect’ and identify the reasons why the Court decided that Treaty Articles could have direct effect. State the conditions for direct effect of a Treaty Article.


6.1.3 Direct effect of Treaty Articles In van Gend, the parties were in a ‘vertical’ relationship: that is, the case was between an individual and a Member State. The question of whether an individual could rely on an Article of the EEC Treaty in an action against another individual (horizontal relationship between the parties) was dealt with in Case 43/75 Defrenne v SABENA [1976] ECR 445. It was held that Ms Defrenne could bring an action against her employer for breach of a Treaty Article requiring equal pay for men and women.

6.1.4 Direct effect of Regulations Article 288 TFEU (ex Article 249 EC) defines the relationship between the various types of Union secondary legislation and national law. Article 288 TFEU states that a Regulation is ‘directly applicable’ in all the Member States. Regulations, therefore, become automatically part of national law and this will normally mean that they can be relied on by individuals in their national courts and thus also have direct effect. The European Court has nonetheless recognised that in order to have direct effect, Regulations must satisfy the three standard conditions. The provision must be sufficiently clear and precise to be enforced by a court: see Case 403/98 Azienda Agricola Monte Arcosu v Regione Autonoma della Sardegna [2001] ECR I-103. Sometimes Regulations need further legislation. See: Case 39/72 Commission v Italy (Slaughtered Cows) [1973] ECR I-01 and Case 128/78 Commission v United Kingdom (Tachographs) [1979] ECR 419.

6.1.5 Direct effect of international agreementsThe position with regard to international agreements is more complex and controversial. In Cases 21–24/72 International Fruit Company v Produktschap voor Groenten en Fruit (No 3) [1972] ECR I-219 the question was posed whether the GATT (General Agreement on Tariffs and Trade) provisions could have direct effect. The Court concluded that ‘the spirit, the general scheme and the terms’ of the provisions were different from those in the EEC Treaty and that its provisions not sufficiently precise and unconditional for direct effect to apply. Free trade agreements were also held not to be capable of creating direct effect as their aim was not to create a single market (Case 270/80 Polydor and RSO Records Inc v Harlequin Record Shops and Simons Records Ltd [1982] ECR 329. However in Case 104/81 Hauptzollamt Mainz v Kupferberg [1982] ECR 3641 another provision of the same agreement was found to have direct effect, as it did fulfil the conditions and fell within the purpose of the agreement. However, this concerned Portugal, which, although not a Member State at the time, did become one soon after. More recently, the Court ruled in Case C-280/93 Germany v Council [1994] ECR I-4973 that under very limited circumstances a GATT provision could prevail over an EC provision, but only if the relevant EC provision expressly referred to the GATT provision.

6.1.6 Direct effect of Decisions Although Article 288 TFEU does not state that Decisions are directly applicable, they are ‘binding in their entirety on those to whom they are addressed’. The Court of Justice has held that they can have direct effect. A national of a Member State to which a Decision had been addressed could invoke that Decision in the national court: see Case 9/70 Grad v Finanzamt Traunstein [1970] ECR 825. In reaching this conclusion, the Court emphasised that this would increase the effectiveness (‘effet utile’) of the Community measure.


6.1.7 Direct effect of DirectivesMore controversial was whether a Directive could have direct effect. Directives are meant to be implemented, that is brought into effect by national legislation within a certain time period. Article 288 TFEU provides:

A Directive is to be binding, as to the result to be achieved, upon each Member State to which it is addressed…

The plain interpretation of these words is that a Directive is addressed to the Member States. To say that it confers rights on individuals would be to blur the distinction between Directives, which require national implementing measures, and Regulations, which do not.

It was thought that Directives could never fulfil the van Gend conditions for direct effect because, by their nature, they require ‘further implementing measures’.

However, in Case 41/74 van Duyn v Home Office [1974] ECR I-337, the Court held that Ms van Duyn could rely on a clause in a Directive which the UK had not introduced into national law.

Activity 6.2Read the judgment in van Duyn in relation to the constitutional issue of direct effect of Directives. Identify three reasons which the Court gave for its landmark decision that Directives could have direct effect. Are the reasons convincing?

6.1.8 Vertical but not horizontal direct effect The Court later added to the reasoning used in van Duyn, basing the direct effect of Directives on the doctrine of estoppel. This principle is one borrowed from English law, but for our purposes it means that the state cannot rely on its own wrongdoing to frustrate the rights of individuals under Directives. Where the Member State is at fault (either because it has not transposed the Directive into national law at all, or because it has done so inaccurately) an individual can claim against that state the rights he or she should have had if the Directive had been correctly implemented. See: Case 148/78 Pubblico Ministero v Ratti [1979] ECR I-629.

The logic of this reasoning is that a Directive can only be invoked vertically, by an individual against the state, and not horizontally, by one individual against another, because individuals are not to blame for the non-implementation of the Directive. This view was confirmed in Case 152/84 Marshall v Southampton & Southwest Hampshire Area Health Authority (Teaching) [1986] ECR 723.

This rule has been criticised because it can lead to inequality: an individual’s ability to bring an action based on a Directive will depend on whether they are suing the state or a private person or company. See the Advocate General’s Opinion in Case C-91/92 Faccini Dori v Recreb srl [1994] ECR I-3325 where he proposed that Directives should be given horizontal direct effect. The Court, however, did not follow the Advocate General but confirmed the original rule that Directives can only have vertical direct effect. However, in recent years the Court has increasingly resorted to other measures to give effect to Union law in what would, at first sight, be purely horizontal cases. For example, in Case C–144/04 Werner Mangold v Rüdiger Helm, [2005] ECR I-7181 the Court did not mention the question in a judgment in a case between two individuals and confined itself to dealing with the incompatibility of the national legislation with Community law where a general principle of Community law (non-discrimination) was concerned. It asserted that it was the responsibility of the national court to guarantee the full effectiveness of the general principle by setting aside the national legislation, even before the date of expiry of the implementation period. The Court seems to go further here than the Advocate General, who referred to Marleasing in order to come to the same conclusion. One the other hand, the Court has given a wide definition to ‘the state’ and thereby has extended the reach of the vertical direct effect of Directives. In Case C-188/89 Foster v British Gas [1990] ECR I-3313, the Court laid down a four-part test for national courts to use to decide whether a body was an ‘emanation of the state’:


Does it perform a public service?

Pursuant to a measure adopted by the state?

Under the control of the state?

Does it have special powers going beyond those of normal commercial undertakings?

The four conditions must all be fulfilled (they are cumulative, not alternative).

An interesting example of how widely the definition can extend is the case of National Union of Teachers v Governing Body of St Mary’s Church of England Junior School [1997] 3 CMLR 360, in which the English Court of Appeal held that the definition of ‘an emanation of the state’ included the governing body of a Church of England state school.

6.1.9 Expiry of time limit It also follows from the reasoning that direct effect is based on the Member State’s fault, that a Directive can only be directly effective after the expiry of the time limit given for its implementation since, until that time, the Member State is not in breach of any obligation. This was confirmed in the Case 148/78 Pubblico Ministero v Ratti [1979] ECR I-629.

Summary The doctrine of direct effect is an example of the creativity of the European Court in developing principles which strengthen the impact of Union law within national legal systems. It enables Union law to be enforced, not just by the Commission under the Treaty rules for enforcement, but by individuals in their national courts – creating a system of ‘dual vigilance’. Perhaps most important in increasing the effectiveness of Union law within Member States was the ruling that a Directive can have direct effect provided the following conditions are fulfilled.

The Directive must be clear and precise.

The Directive must be unconditional.

The time limit for implementation of the Directive must have expired.

The action based on direct effect of the Directive can only be vertical – against an ‘emanation of the state’.

The Court has been willing to give ‘incidental’ horizontal direct effect of Directives in triangular situations: see Case 194/94 CIA Security International v Signalson [1996] ECR I-2201. Other cases on the ‘incidental’ horizontal direct effect of Directives are: Case 441/93 Panagis Pafitis [1996] ECR I-1829; Case 444/98 Unilever Italia v Central Food SpA [2000] ECR I-7535. This only applies in a very few situations, and these seem mostly to be a ‘one-off’, where private parties were concerned on both sides, but where no particular obligation was put on the defendant.

Self-assessment questions 1. Define what is meant by ‘direct effect’.

2. Which Treaty Article defines the different forms of Union secondary legislation?

3. What is the main difference between a Regulation and a Directive?

4. What is the difference between vertical and horizontal direct effect?

5. What is the test for an ‘emanation of the state’?

6. What are the conditions for direct effect of Directives?


6.2 Indirect effect of Directives

Essential reading Horspool and Humphreys, Chapter 7(I): ‘Direct applicability and direct effect’,

sections 7.14–7.19, pp.185–188.

Craig and de Búrca, Chapter 8(5)(d): ‘Indirect Effect’, pp.287–300.

6.2.1 The duty of harmonious interpretation Partly to deal with the problem for individuals who could not rely on Directives because the conditions for direct effect were not fulfilled, the Court developed the concept of indirect effect. The starting point for this doctrine is Case 14/83 von Colson v Land Nordrhein-Westfalen [1984] ECR I-891.

Although this case concerned a vertical claim against the German prison service, the Directive in question did not have direct effect because the provision (concerning remedies for sex discrimination) was insufficiently precise to be enforced by a court. However, the European Court held that the national court is under a duty to interpret existing national law, so far as possible, to achieve the result laid down by the Directive. The doctrine is based on the idea that national courts are part of the state and, consequently, are bound by what is now Article 4(3) TEU (formerly Article 10 EC). That Article requires Member States ‘pursuant to the principle of sincere cooperation’ to ‘take any appropriate measure… to ensure the fulfilment of their obligations’ under the Treaties. The effect of the ruling is to shift the responsibility for giving effect to Directives on to national courts in situations where their governments have failed to introduce adequate national implementing measures.

The principle means that national courts are under a duty to interpret national legislation ‘in the light of the wording and purpose’ of Union law. In von Colson, there was some national legislation which purported to implement the Community Directive but which did so inadequately (the amount of compensation available was very small). As a result, it was initially thought that the duty of harmonious interpretation (giving indirect effect to the Directive) only applied to national legislation which had been intended to implement the Directive in question. Whether the rule applied to the interpretation of national law more generally was unclear. The European Court has since made clear that the duty applies in relation to all national legislation, whether passed before or after the relevant Union legislation, and whether intended to implement it or not; see Case C-106/89 Marleasing SA v La Comercial Internacional de Alimentacion SA [1990] ECR I-4135. Because it is a rule applicable to the court, rather than the parties, it applies irrespective of whether the action is ‘vertical’ or ‘horizontal’.

6.2.2 Limits to the doctrine of indirect effect There are limits to the usefulness of this doctrine from the point of view of the individual, however, since it presupposes the existence of some relevant national legislation that is capable of being interpreted to mean what the Directive requires. National courts are only required to carry out this duty ‘so far as possible’ – so if there is no relevant national law, or if the relevant national law is only capable of one interpretation, the doctrine could not be used.

The Court has also made clear that the application of the doctrine is subject to the general principles of law, such as legal certainty and non-retroactivity: see Case 80/86 Kolpinghuis [1987] ECR 3969.

The Court has held that the doctrine cannot be applied where it would give rise to, or aggravate, criminal liability: see Case 168/95 Criminal Proceedings against Luciano Arcaro [1996] ECR I-4705. In Case C-387/02 Criminal Proceedings against Berlusconi and others [2005] ECR I-3565, where the Italian Prime Minister was involved in proceedings concerning allegations of fraud under Italian companies legislation pursuant to Directive 68/151/EEC, the Court stated that the Directive could not be relied upon


against accused persons by the authorities of a Member State within the context of criminal proceedings, as the criminal liability of the accused could not be determined or aggravated by the Directive itself. Yet such a limitation does not appear to exist in relation to the imposition of civil liabilities on individuals. In Case 456/98 Centrosteel v Adipol [2000] ECR I-6007, the ECJ said that the duty to interpret national law in the light of the wording and purpose of Community law applied even when this would impose a civil liability on private parties. On this point see also Case C-185/97 Coote v Granada Hospital [1998] ECR I-5199, and Cases C-240/98–244/98 Oceano Grupo Editorial v Rocio Murciano Quintero [2000] ECR I-4491. In the Pupino Case C–105/03 [2005] ECR I-5285, which was a case brought under the then third pillar (see further Chapter 3), the Court, whose jurisdiction at that time was limited in matters of freedom, security and justice (which has now been included in the TFEU where the Court has full jurisdiction) but had been accepted by Italy, stated that a Council Framework Decision (No 2001/220/JHA) should be interpreted in the same way as a case under the EC Treaty following a preliminary reference under Article 234 EC (now Article 267 TFEU). The Court stated (at paragraph 42): ‘It would be difficult for the Union to carry out its task effectively if the principle of loyal cooperation… were not also binding in the area of police and judicial cooperation in criminal matters, which is moreover entirely based on cooperation between the Member States and the institutions.’

Self-assessment questions 1. What is the legal basis for the duty of harmonious interpretation imposed on

national courts in the Von Colson case?

2. For the doctrine of indirect effect to apply, is it relevant whether the action is horizontal or vertical?

3. To which kinds of national measure does the duty of harmonious interpretation apply?

4. Can the doctrine be used in circumstances where it would give rise to individual criminal liability – or to civil liability?

The application of this rule of construction initially gave rise to difficulties in national courts as it appeared to require them to give effect to Union law that was not directly effective. The evolution of the UK courts’ approach, and their eventual acceptance of the doctrine, can be traced in the following cases. These illustrate the tensions between the UK doctrines of Parliamentary sovereignty and the separation of powers on the one hand, and the Union doctrine of supremacy on the other (see further on this, section 6.6 below).

Pickstone and Others v Freemans plc [1987] 3 WLR 811 (CA).

Duke v GEC Reliance Ltd [1988] AC 618 (HL).

Foster v British Gas [1988] ICR 584.

Litster v Forth Dry Dock & Engineering Co. Ltd [1989] IRLR 161.

Webb v EMO Air Cargo (UK) Ltd [1992] 2 All ER 43.

C-32/93 Webb v EMO Air Cargo (UK) Ltd [1994] ECR I-3567.


6.3 Remedies for Union law rights

Essential reading Horspool and Humphreys, Chapter 7(III): ‘State liability and other remedies in Union

law’, sections 7.80–7.99, pp.216–226.

Craig and de Búrca, Chapter 9: ‘The application of EC law: remedies in national courts’, pp.305–341.

6.3.1 Basic principlesIndividuals do not have extensive rights to enforce Union law directly in the Court of Justice of the European Union. They can only do so under very strict standing conditions through the judicial review procedure (Article 263 TFEU), actions for failure to act (Article 265 TFEU) and in private actions for damages against the Union institutions (Articles 268 and 340 TFEU) (see Chapter 8). Enforcement of Union law rights by individuals or legal persons (companies) therefore mainly takes place at the national level in the domestic court. The remedies obtainable in respect of Union law are those available under national law, there is no uniform set of Union law remedies. The one exception to this is the court-made remedy of state liability (see below).

In Case 158/80 Rewe v Hauptzollamt Kiel [1981] ECR 1805 the Court reiterated:

Community law… was not intended to create new remedies in the national courts to ensure the observance of Community law other than those already laid down by national law.

However, the Court has, from the beginning, stipulated that the remedy obtained must comply with two principles, laid down in the following two cases: Case 33/76 Rewe Zentralfinanz [1976] ECR 1989 and Case 45/76 Comet BV v Produktschap [1976] ECR 2043.

The two principles are:

the principle of equivalence: the remedy for the Union law right should be no less favourable than those relating to similar domestic claims (non-discrimination)

the requirement of practical possibility: that the remedy should not be such as in practice to make it virtually impossible or excessively difficult (added in later case law) to obtain reparation.

6.3.2 Real effectiveness and deterrence Subsequently the Court has also insisted that the remedies provided by national law must be effective, adequate, should act as a deterrent and guarantee real and effective protection.

You will recall C-14/83 von Colson v Land Nordrhein-Westfalen [1984] ECR 1891, as the case which established the principle of indirect effect (see above at 6.2.1). It had been decided by the national court that the reason that Ms von Colson was not appointed as a prison officer was unlawful sex discrimination, prohibited under the Equal Treatment Directive (Directive 76/207, now incorporated in ‘recast’ Directive 2006/54/EC – see Chapter 14). The Article 234 EC (now 267 TFEU) reference to the Court was in regard to the remedy available for this breach of her Community law right. The Directive had been transposed into German law but the implementing of national law merely gave her the right to recover her travel expenses incurred in applying for the job.

The Court stated that the national court must interpret the national law ‘in the light of the wording and purpose’ of the relevant Community law in order to ensure Ms von Colson an adequate and effective remedy, as required by Article 6 of the Directive, which said the remedy must also have a ‘deterrent effect’. The compensation must, therefore, ‘be adequate in relation to the damage sustained’.

In the subsequent Factortame case it became clear that the requirement that national remedies for breach of Community law rights should be adequate and effective was a new, universal requirement to be applied to all such remedies.


In Case C-213/89 R v Secretary of State for Transport, ex parte Factortame Ltd and Others [1990] ECR I-2433 (see 6.4.3) the Court stated that interim relief must be granted to the fishing companies challenging the validity of the Merchant Shipping Act 1988, pending a judgment as to the compatibility of that Act with European Community law.

The House of Lords had held that it had no jurisdiction to suspend an Act of Parliament (which is what interim relief in this case required) and under the fundamental doctrine of English law, the sovereignty of Parliament, that was correct. But the Court stated that in order to ensure the full effectiveness of Community law:

a national court which, in a case before it concerning Community law, considers that the sole obstacle which precludes it from granting interim relief is a rule of national law, must set aside that rule.

The principle of the requirement of effectiveness of even ‘putative’ Union law rights (the fishing companies’ rights in the Factortame case had yet to be established) was now firmly entrenched.

This case could be considered as requiring English law to create a new remedy, interim relief against the Crown. Although the Court’s ruling was only applicable within the scope of application of Union law, it was then extended to other actions for an injunction against the Crown, thus changing a fundamental rule of English law. See M v Home Office [1994]1 AC 377.

Two examples of the application of the requirement for adequate and effective remedies are: Case 271/91 Marshall (No 2) [1993] 3 CMLR 293 and Case 222/84 Johnson v Royal Ulster Constabulary [1986]. The Marshall (No 2) case was a claim for damages arising from Mrs Marshall’s successful action in Case 152/84 Marshall v Southampton & Southwest Hampshire Area Health Authority [1986] ECR 723 (see above under 6.1). Her early retirement had been held to be unfair dismissal. Her compensation was subject to an upper limit which prevented her from receiving full compensation as the amount did not include the interest on the award between the date of the breach and the judgment. The Court said the application of the upper limit would therefore not provide for an adequate remedy. The Directive required that the remedy chosen by the state must be adequate and effective (Article 6) and since the remedy chosen here was compensation it must have no ceiling and include interest.

In Case 222/84 Johnson v Royal Ulster Constabulary (RUC) [1986] ECR 1651 the Chief Constable for the Royal Ulster Constabulary (RUC) in Northern Ireland decided that men in the RUC would carry firearms on a daily basis. Women would not be equipped with or trained to bear firearms and would not be asked to perform general duties which might include the use of firearms. Johnston had been an unarmed member of the RUC for three years and when her contract came up for renewal it was not renewed. She sought to challenge this on the grounds of sex discrimination under the Equal Treatment Directive (ETD) Directive 76/207 (now Directive 2006/54) (see Chapter 14 for further discussion of this case). It was argued that a certificate relating to national security and public safety signed by the Secretary of State for Northern Ireland prevented the national court from hearing her sex discrimination case; the certificate (issued under Article 53 of the Sex Discrimination (NI) Order 1974) was said to be ‘conclusive evidence’ that the Chief Constable’s refusal to employ her ‘was for the purpose of safeguarding national security or of protecting public safety or public order’, and was not subject to review by a court. The European Court, in its ruling, referred to the requirement for ‘effective judicial control’ under Article 6 of the ETD and stated that this was also a general principle common to all the Member States and required by Articles 6 and 13 of the ECHR. All persons had the right to obtain an effective remedy in a competent court against measures which they considered to be contrary to the principle of equal treatment as laid down in the Directive, and the certificate, therefore, could not be held to be ‘conclusive’. Mrs Johnston had the right to have her case adjudicated by a court.

Note also the requirement placed on national authorities to give reasons for their decisions in regard to Community law rights, Case 222/86 UNECTEF v Heylens [1987] ECR 4097.


6.3.3 The application of national procedural rules The European Court has also considered the legality of the application of national procedural rules which affect the exercise of Union law rights.

Case 208/90 Emmott v Minister of Social Welfare [1991] ECR 14269 is considered to be the high water mark of the Court’s willingness to intervene and later cases have manifested a retreat from this position.

Directive 79/7 prohibits discrimination on the grounds of sex in regard to social security measures. It was implemented late by the Irish government. When Mrs Emmott sought to bring an action relying on the Directive, she was told her action was time barred. On a reference as to whether it was contrary to Community law to rely on the time limits, the Court held that time limits do not start to run until after the proper transposition of the Directive, so she was not, after all, out of time. Although time limits are reasonable in principle, a national government cannot rely on its own default in implementing the Directive late.

However, in Case 338/91 Steenhorst-Neerings [1993] ECR I-5475 the Court held that a national rule restricting the retroactive effect of a claim for benefits for incapacity for work was in accordance with Community law. The Court considered this only with reference to the two principles (equivalence and practical possibility) and held that the national rule in question satisfied those conditions.

Activity 6.3With reference to the von Colson case, explain why the two principles of ‘equivalence’ and ‘practical possibility’ were not sufficient to ensure that Union law rights were adequately protected.

6.4 Action for damages against a Member State for breach of Union law

Essential reading Horspool and Humphreys, Chapter 7(III): ‘State liability and other remedies in Union

law’, sections 7.100–7.111, pp.226–236.

Craig and De Búrca, Chapter 9(7): ‘The principle of (State) liability for breach of EC law’, pp.328–341.

6.4.1 Legal basis for state liability in damages Member States’ liability to pay damages to individuals in respect of their breaches of Union law is not laid down in the Treaty and is yet another example of the Court’s activism in promoting the rights of individuals and the effective enforcement of Union law. We have seen above what the problems were concerning the application of the principle of direct effect of Union law. The Court considered a different way of giving maximum possible effect to Community law by introducing a uniform remedy for breach of Community law, irrespective of whether legislation had direct effect or not.

The existence of this liability was first established in Joined Cases C-6/90 and C-9/90 Andrea Francovich, Danila Bonifaci and Others v Italian Republic [1991] ECR I-5357.

The case concerned the total failure of the Italian authorities to transpose a Directive into Italian law. The Court declared that the principle of state liability was ‘inherent in the scheme of the Treaty’, basing these observations on Article 5 of the Treaty (now Article 4(3) TEU) and the principle of effet utile (effectiveness of Union law).

6.4.2 Conditions for liability for non-implementation of a Directive The Court laid down three conditions for state liability where there has been a complete failure to transpose a Directive.

The Directive must be intended to confer rights on individuals.


The content of those rights must be ascertainable from the terms of the Directive.

There must be a causal link between the loss suffered and the Member State’s breach. In other words, there must be a link between the cause of the loss suffered and the breach of EU law by the Member State.

6.4.3 Liability for other breaches of Union law In Francovich, the judgment was limited to Member States’ failure to implement Directives. Whether a Member State could be liable in damages for breaches of other Community law obligations, such as under Treaty Articles, was the issue in Joined Cases C-46/93 and C-46/93 Brasserie du Pecheur v Germany and R v Secretary of Transport ex parte Factortame (Brasserie du Pecheur/Factortame III).

The Court affirmed that the principle of Member State liability was available for all Community law provisions, whether or not they had direct effect. It also stated that ‘in the absence of a particular justification’, the conditions for the liability of the state would be the same as for the Community institutions under Article 215 of the Treaty, (now Article 340 TFEU). It is not strict liability: there must exist a ‘sufficiently serious’ breach for the state to be held liable in damages.

A Member State will be liable to an individual for breach of its Union law obligations where:

the rule of law breached is intended to confer rights on individuals

the breach is sufficiently serious

there is a direct causal link between the breach of the obligation resting on the state and the damage sustained by the parties.

As to whether the breach of Union law is sufficiently serious, the decisive point is whether the Member State has ‘manifestly and gravely ignored the limits on its discretion’.

It is for the national courts to decide whether this is the case, but the Court listed a number of factors to be taken into account by the national court. These were:

the clarity and precision of the rule breached

the measure of discretion left by that rule to the national or Union authorities

whether the infringement and the damage caused was intentional or involuntary

whether any error of law was excusable or inexcusable

the fact that the position adopted by a Union institution may have contributed towards the omission

the adoption or retention of national measures or practices contrary to Union law.

It is not necessary for the Commission to have obtained a ruling under Article 263 TFEU from the European Court that the Member State has breached Union law. If there had been such a ruling (as had been the case in Francovich) and the Member State persisted in the breach, that would automatically lead to a finding that the breach was ‘sufficiently serious’:

on any view, a breach of Community law will clearly be sufficiently serious if it has persisted despite a judgment finding the infringement in question to be established, or a preliminary ruling or settled case law on the matter, from which it is clear that the conduct in question constituted an infringement. [paragraph 57]

Following this European Court ruling on the preliminary reference, the House of Lords decided in R v Secretary of State for Transport ex parte Factortame Ltd and others [1999] 4 All ER 906, that the breaches of EC law by the United Kingdom arising out of provisions in the Merchant Shipping Act 1998 were sufficiently serious to entitle Factortame Ltd and 96 others to compensation under the principle of state liability.


Activity 6.4a. With reference to the von Colson case, explain why the two principles of

‘equivalence’ and ‘practical possibility’ were not sufficient to ensure that Community law rights were adequately protected.

b. Read the ECJ’s judgment in Brasserie du Pecheur/Factortame. Summarise the reasons the Court gave for finding that liability in damages existed for Member States’ breaches of Union law, and that liability was not strict.

No feedback is provided: the answer can be found in reading the judgment.

6.4.4 Application of state liability In Case 178, 179, 188 and 190/94 Dillenkofer v Germany [1996] ECR I-4845, the Court held that the non-implementation of a Directive is always a sufficiently serious breach, so only the Francovich conditions need to be fulfilled.

The procedure for bringing an action for damages against the state will be governed by national rules. Case 392/93 l v HM Treasury ex parte British Telecommunications plc [1996] ECR I-1631 is an interesting case concerning the incorrect transposition of a Directive. The breach was held not to be sufficiently serious because the wording of the EC Directive was unclear, and several other Member States had also unintentionally misinterpreted it.

In Case C-424/97 Haim v Kassenzahnärztliche Vereinigung Nordrhein [2000] ECR I-5123, a public law body separate from the state was held liable under the principle of state liability.

For the first time in Case 224/01 Köbler v Republik Österreich [2003] ECR I-10239, the European Court ruled that it was possible for the principle of state liability to apply where the alleged infringement stemmed from a decision of a national court of last instance. The question of liability would depend on the established criteria for state liability.

Whether the infringement of Community law was sufficiently serious depended on consideration of the same factors cited in the Factortame case: whether the national court had manifestly infringed the applicable law, that is, whether the ‘infringement was manifest’. In deciding what this meant, regard had to be given to the specific nature of the judicial function and to the legitimate requirements of legal certainty. In order to decide whether the infringement was ‘manifest’, the national court hearing a claim for damages must take account of ‘all the factors which characterise the situation put before it’.

The Court continued that:

… those factors include, in particular, the degree of clarity and precision of the rule infringed, whether the infringement was intentional, whether the error of law was excusable or inexcusable, the position taken, where applicable, by a Community institution and noncompliance by the court in question with its obligation to make a reference for a preliminary ruling under the third paragraph of Article 234 EC. In any event, an infringement of Community law will be sufficiently serious where the decision concerned was made in manifest breach of the case law of the Court in the matter.

However, rather surprisingly, on the facts presented in the particular case, there was not a ‘manifest infringement’ of EC law.

Summary The doctrine of state liability forms part of the package of doctrines (direct effect, indirect effect and state liability) developed by the European Court with the dual objectives of ensuring that Union law prevails and is enforced within the Member States, and on the other hand that individuals can obtain their rights under Union law. The availability of damages from the state applies to any individual who has suffered loss as a result of a sufficiently serious breach of Union law. Thus it overcomes the problems inherent in the direct effect doctrine where the conditions are not fulfilled and where direct and indirect effect cannot apply.


6.5 The supremacy of EU law

Essential reading Horspool and Humphreys, Chapter 7(II): ‘Supremacy of Union law’, sections

7.20–7.30, pp.189–193.

Craig and De Búrca, Chapter 10: ‘The relationship between EC law and national law: supremacy’, pp.344–377.

The principle of supremacy or primacy of Union law has been developed by the Court of Justice. It is implicit in Case 26/62 von Gend en Loos [1963] ECR I which founded the doctrine of direct effect. It was stated explicitly in Case 6/64 Costa v ENEL [1964] ECR 585 where the Court said that, by entering into the EC Treaty, Member States had limited their sovereign rights and that Community law ‘could not… be overridden by domestic legal provisions’.

In a further step, in Case 11/70 Internationale Handelsgesellschaft GmbH [1970] ECR I-125, the Court held that Community law took precedence even over a fundamental rule in the German national constitution.

The clearest statement of the implications of the supremacy of Community law came in Case 106/77 Simmenthal SpA (No 2) [1978] ECR 629 where the Court held that national courts, even a lowly court of first instance, have a duty to set aside provisions of national law which are incompatible with EC law. There was no need to wait for the national law to be amended in line with national constitutional procedures: the national rule had to be set aside immediately if it conflicted with a directly applicable or directly effective Community provision.

Nor does the obligation to set aside conflicting national rules only apply to national courts: even an administrative agency dealing with a national social insurance scheme was held to be required to do so in Case C-118/00 Larsy v INASTI [2001] ECR I-5063.

Although the national measure is rendered ‘inapplicable’, this does not absolve the Member State from the need formally to repeal it. In the interests of legal certainty, the Court said that Member States must also repeal the offending national rule: see Case 167/73 Commission v France (French Merchant Seamen) [1974] ECR 359.

Even if it is not yet clear whether a person actually has a right which they claim under Union law (i.e. it is a ‘putative’ right, not a definite one), the doctrine of supremacy requires a national court to set aside any national procedural rules which might prevent them from getting the full benefit of the Union right if it is eventually found that they have it!

This was laid down in the case C-213/89 R v Secretary of State for Transport, ex parte Factortame Ltd and others [1990] ECR I-2433. Spanish fishermen claimed that the UK’s Merchant Shipping Act breached a number of EC Treaty articles and wrongly prevented them from fishing in British waters. They asked for interim relief (an injunction setting aside the offending clauses of the Act pending the full hearing of the case). The problem was that under English law, courts could not grant an injunction ‘against the Crown’, that is, they could not order the suspension of an Act of Parliament. On the other hand, if the Act continued to be applied, the Spanish fishermen would probably be driven out of business and any subsequent judgment in their favour in the main proceedings would be useless – their Community law right would be rendered ‘ineffective’. The Court ruled that, in order to ensure the ‘full effectiveness’ of Community law, the English rule preventing suspension of the Act must be set aside. The House of Lords went on to grant the injunction.

The supremacy of Union law over national law is now stated in a Declaration attached to the Treaty of Lisbon. This reiterates the doctrine as stated by the Court as follows:

The Conference recalls that, in accordance with well settled case law of the Court of Justice of the European Union, the Treaties and the law adopted by the Union on the basis of the Treaties have primacy over the law of Member States, under the conditions laid down by the said case law.


There is also attached the Opinion of the Council Legal Service of 22 June 2007 which states:

It results from the case-law of the Court of Justice that primacy of EC law is a cornerstone principle of Community law. According to the Court, this principle is inherent to the specific nature of the European Community. At the time of the first judgment of this established case law (Costa/ENEL, 15 July 1964, Case 6/64) there was no mention of primacy in the treaty. It is still the case today. The fact that the principle of primacy will not be included in the future treaty shall not in any way change the existence of the principle and the existing case-law of the Court of Justice.

Thus, it is clear that the supremacy of Union law is firmly established by the decisions of the Court of Justice and the deliberations of national courts.

6.6 EU law from the Member States’ perspective

Essential reading Horspool and Humphreys, Chapter 7(II): ‘Supremacy of Union law’, sections

7.31–7.79, pp.194–215.

Craig and De Búrca, Chapter 10(3): ‘The Second Dimension: Supremacy from the Perspective of the Member States’, pp.353–374.

6.6.1 Supremacy of Union law in the UKThe concepts of direct effect and supremacy, as developed by the Court of Justice, have sometimes provoked a strong reaction from national courts. The way in which Union law enters into the legal systems of the Member States depends, from a constitutional point of view, on whether the Member State is monist or dualist in its approach to international law. In monist states, the constitution provides for international law to enter into domestic law without the need for further national measures of incorporation or transposition. France is an example of a monist state. In dualist states, such as the UK, international law does not become part of domestic law until it is incorporated by a domestic statute. So when the UK joined the EEC, the European Communities Act 1972 had to be adopted to give effect to directly effective provisions of Community law within the UK. It has been amended, following the adoption of the SEA and all the subsequent treaties by the relevant European Communities (Union) (Amendment) Acts. The cases on the application of the principle of indirect effect in the UK courts (see Section 6.2 above) show how the English judiciary has traditionally based its application of Union law on the rules laid down in this English statute, expressing the will of Parliament, rather than on any abstract notion of supremacy stemming from the Union Treaties. For the ways in which English courts have dealt with the interpretation of national law in accordance with Community law, see the following cases.

Pickstone v Freemans plc [1989] AC 66 HL.

Litster v Forth Dry Dock and Engineering Co Ltd [1990] 1 AC 546 HL.

Duke v GEC Reliance Ltd [1988] AC 618 HL.

Case C-32/93 Webb v EMO Cargo (UK) Ltd [1994] ECR I-3567.

However, the House of Lords accepted the Court’s ruling in the landmark case: Case C-213/89 Regina v Secretary of State for Transport, ex parte Factortame Ltd and Others (No 1) [1990] ECR I-2433, that an English court could be obliged to set aside a rule of national law in order to safeguard putative EC law rights. This meant that the application of an English Act of Parliament had to be suspended pending the outcome of a claim that its provisions infringed Community law. Under English rules, courts could not grant an injunction ‘against the Crown’ (i.e. suspend an Act of Parliament) but the House of Lords accepted, following a reference to the ECJ, that such national rules had to be set aside if they interfered with the protection of Community rights (see also 6.4.1 and 6.5).


This case has far-reaching constitutional implications in the United Kingdom. It makes it clear that any Act of Parliament must be read as subject to directly enforceable rights under Union law.

See also Factortame Ltd v Secretary of State for Transport (No 2) [1991] ECR I-3905, and R v Secretary of State for Employment, ex parte Equal Opportunities Commission, HL [1994] 1 AC 603.

The cases Thoburn v Sunderland County Council, Hunt v London Borough of Hackney, Harman and Dove v Cornwall County Council and Collins v London Borough of Sutton [2003] QB 51 are also interesting on this issue. They concerned the so-called ‘metric martyrs’ who refused to use metric weights as well as imperial weights as required under EC law. They were convicted under the Weights and Measures Act 1985 and a number of other statutory instruments and appealed to the High Court. The case was heard by Sir John Laws, who dismissed the appeals. He reiterated the traditional view about the basis of the supremacy of EC law in the UK, basing it on the constitutional law of the UK rather than on principles of EU law. He stated that the European Communities Act 1972 is a constitutional statute which means that it cannot be impliedly repealed by a later inconsistent statute. Hence it would prevail over later statutes which were inconsistent. However, he went on to comment that:

In the event, which no doubt would never happen in the real world, that European measure was seen to be repugnant to a fundamental or constitutional right guaranteed by the law of England, a question would arise whether the general words of the ECA were sufficient to incorporate the measure and give it overriding effect in domestic law.

See also Case C-32/93 Webb v EMO Cargo (UK) Ltd [1994] ECRI-3567.

It is instructive to compare the attitude towards Union law in other Member States.

6.6.2 Germany In Case 11/70 Internationale Handelsgesellschaft [1970] ECR 1125, the ECJ had stated that the validity of Community measures could only be judged according to Community criteria, not according to principles enshrined in the German constitution. This ruling was not accepted by the German Federal Constitutional Court (FCC), however. It noted that the Community did not have a codified catalogue of human rights, and held that Community measures would, therefore, be subject to the fundamental human rights contained in the German constitution: see Solange I [1974] 2 CMLR 540.

In Wünsche Handelsgesellschaft (Solange II) [1987] 3 CMLR 225, however, the Federal Constitutional Court acknowledged that Community law now had its own equivalent standard of human rights protection.

Nonetheless, in Brunner v The European Union Treaty [1994] 1 CMLR 57, when considering whether the Maastricht Treaty on European Union unduly extended the competences of the European Community and made too many inroads on German sovereignty, the Federal Constitutional Court again re-affirmed German constitutional sovereignty and its right to review the scope of Community competence.

In its judgment after various constitutional complaints had been brought before it by private citizens as well as by a political party in respect of the ratification of the Lisbon Treaty, the FCC ruled in June 2009 that the Treaty was in accordance with the German Basic Law and simply objected to the domestic law which implemented the Treaty and annulled the law. As regards the Lisbon Treaty itself, it spelt out in a lengthy judgment the limits to which integration could go and emphasised the safeguards under the German Basic law which must be respected. It did not, however, consider that the Treaty as such exceeded the boundaries of what was acceptable under the Basic Law. A new implementing law was then passed in September 2009 and ratification duly followed.


Activity 6.5Read the extract from the Brunner judgment in Craig and De Búrca. Consider whether the approach of the German Federal Constitutional Court is compatible with the ‘limitation of sovereign rights’ referred to by the ECJ in the van Gend and Costa v ENEL cases.

No feedback provided – the aim of the exercise is to develop critical evaluation and ability to summarise and compare competing arguments contained in the cases.

6.6.3 FranceFrance’s legal order has two court systems: the judicial and the administrative courts. The Cour de Cassation (highest civil court) accepted the primacy of directly effective EC law, on the basis of Article 55 of the French constitution, see Vabre and Weigel (Cour de Cassation) [1975] 2 CMLR 336.

The Conseil d’Etat, the supreme administrative court, has shown reluctance to accept the primacy of Union law, and in particular has refused to accept that Directives can have direct effect (in the French Court’s view, only a French implementing measure can give effect to a Directive according to Article 249 EC (now Article 288 TFEU): see Minister of the Interior v Cohn-Bendit [1980] 1 CMLR 543. However, in Boisdet [1991] 1 CMLR 3, it held that an EC Regulation took precedence over subsequent French regulations which conflicted with it, on the basis of the Court’s case law. In Rothmans and Arizona Tobacco [1993] 1 CMLR 253, it awarded damages under the Factortame principle, for loss caused by a Ministerial order which conflicted with an EC Directive.

While, in practice, therefore, the French courts accept the primacy of directly effective of Union law, their reasoning is frequently based on the French constitution, rather than on the European Court’s doctrine of supremacy. This is a similar view to that expressed in UK and German courts that it is the national constitution which is at the head of the legal order and that Union law supremacy exists only in so far as it is provided for under national law.

6.6.4 Italy The Italian Constitutional Court has accepted the supremacy of Union law, based on Article 11 of the Italian constitution, see Frontini v Ministero delle Finanze [1974] 2 CMLR 372. However it reserved the right to ensure that the fundamental principles of the Italian constitution were not infringed by Union law. It reaffirmed this position in Fragd [1990] CML Rev 94, stating that if it found that a Community measure infringed those fundamental rights, it would declare it inapplicable – thereby giving precedence to the Italian constitution.

Summary The supremacy of Union law over national laws of the Member States is not explicitly stated in the Union Treaties but the Court has held that it is implicit in Articles 10 and 249 EC (now Articles 4(3) TEU and 288 TFEU) and, on this basis, has developed the principle through a line of cases. National courts have generally accorded supremacy to directly effective Union law, and have accepted and followed the obligation to interpret national law as far as possible in the light of Union law (even if not directly effective) but frequently basing that supremacy on provisions of national law rather than on the Court’s rulings. They have expressed particular reservations in relation to fundamental rights recognised in national constitutions, and pledged to uphold these in the face of conflicting Union provisions, although, as yet, there has not been an instance where a Union provision has actually been struck down on this ground. A proviso has also been expressed by German and UK courts, that they would not give precedence to a Union measure which went beyond the scope of Union competence. At the moment this, too, is a hypothetical scenario.


Activity 6.6a. Explain how the granting of interim relief as required by the ECJ in Case 213/89 R

v Secretary of State for Transport, ex parte Factortame Ltd and Others [1990] ECR I-2433 protected the Spanish fishing companies.

b. Why were the rights of the fishing companies in Case 213/89 (above) called ‘putative rights’?

Self-assessment questions 1. In which case did the Court of Justice first state explicitly that European law

takes precedence over conflicting national law?

2. Which Treaty Articles lend support to the notion of supremacy of Union law?

3. What is the difference between a monist and a dualist state?

4. Which UK statute makes Union law applicable in the UK?

Useful further reading Tridimas, T. ‘The Court of Justice and judicial activism’ 21 European Law Review

199, 205 [1996]

Lenaerts, K. ‘Constitutionalism and the Many Faces of Federalism’ American Journal of Comparative Law Vol.38, p.208 [1990]

Lenaerts, K. ‘The rule of law and the coherence of the judicial system of the European Union’, CMLRev 44:1625-1659 [2007]

Schermers, H.G. and D.F. Waelbroek, ’The directly effective provisions of community law are the backbone of the Community’s legal system’ in Judicial Protection in the European Communities. (Amsterdam: Kluwer Law International, 1991).

Nyssens, H. and K. Lackhoff, ’Direct effect of Directives in triangular situations’, 23 European Law Review 397 [1998]

Klamert, M. ‘Judicial implementation of Directives and anticipatory indirect effect: connecting the dots’ CML Rev 43:1251–1275, [2006]

de Cecco, F. ‘Room to move? Minimum harmonization and fundamental rights’, CML Rev 43:9–30, [2006]

Rasmussen, H. ‘Present and future European Judicial problems after enlargement and the post-2005 ideological revolt‘, CMLRev 44:1681–1687 [2007].

Sadurski, W. ‘Solange, Chapter 3: Constitutional Courts in Central Europe – Democracy – European Union’, European Law Journal Vol.14, No.1, January 2008, pp.1–35.

Sample examination questions Question 1 To what extent is it possible to distinguish between the concept of direct applicability and the concept of direct effect?

Question 2 Why might the European Commission consider that one of the most effective means of achieving economic integration was to encourage private parties to bring actions based on Union law in national courts?

Question 3 Discuss the significance of the Factortame case for Union law and for the constitutional law of the Member States.

Question 4 Evaluate the ‘interpretive obligation’, both from the standpoint of the European Union and from the standpoint of the Member States.


Advice on answering the questions Question 1 Direct applicability is a concept which derives from Article 288 TFEU and refers to the operation of Regulations only. Direct effect, on the other hand, is a concept developed by the Court of Justice to give effect (and precedence) within national legal systems to a wider range of Union measures including Treaty Articles, Decisions and Directives. Define direct effect. This basic answer would need to be built on with a discussion of the case law on Regulations, such as the Case 403/98 Azienda Agricola Monte Arcosu v Regione Autonoma della Sardegna [2001] ECR I-103 which shows that the concepts are not synonymous – a Regulation may be directly applicable under Article 288 TFEU but that does not necessarily mean that all its provisions are directly effective.

This could lead on to a discussion of the conditions for direct effect as developed by the Court in van Gend en Loos, and in van Duyn, Ratti, and Marshall, in relation to Directives.

Question 2 This questions involves a discussion of ‘dual vigilance’ – the idea that Union law will be more effective if its enforcement does not solely depend on the Commission’s power under Article 258 TFEU (which is discretionary) to bring enforcement proceedings against Member States. The Commission does not have the resources to bring proceedings in every possible case of infringement. By introducing the concept of direct effect of Union law, the Court enabled individuals and companies throughout the EU to become ‘enforcers’ of Union law in the Member States without the need for Commission involvement. This answer could be expanded with a discussion of the ways in which private parties can bring actions in national courts – on the basis of direct effect, indirect effect or in actions for damages on the basis of the state liability doctrine, citing relevant case law on each doctrine.

Question 3 This question does not say which of the Factortame cases it is referring to, so it would be necessary to cover both of the major Factortame rulings. The first of these concerned the relationship between national law and EC law, and whether the latter required the House of Lords to suspend the operation of the UK statute (the Merchant Shipping Act) pending a ruling on whether or not it was compatible with Community law. The significance of this case is that it went further than earlier case law on supremacy. The Court had ruled in the Simmenthal case that national courts had to set aside national laws which conflicted with directly effective Community rules. Factortame (1) concerned the availability of an injunction against the Crown, as an interim measure, pending the outcome of the case – in other words to protect putative EC law rights, the existence of which had not yet been confirmed by the Court. The Court held that the UK rule prohibiting injunctions against the Crown had to be set aside where it would otherwise prevent the granting of interim relief to protect putative Community law rights. The Court said this was necessary to ensure the ‘full effectiveness’ of Community law.

Another significant Factortame case for Union law is the Factortame III/Brasserie du Pêcheur judgment which established that Member States can be liable in damages for breach of any type of Union measure. It significantly extended the liability created by the Francovich case in relation to unimplemented Directives. Discuss the conditions laid down for state liability.

Question 4 Begin by explaining what the obligation is (von Colson) (Marleasing). Discuss its purpose from the EU standpoint – it uses Article 10 EC (now Article 4(3) TEU) to enroll national courts in the task of giving effect to Union Directives where these have not been, or have been incorrectly, implemented by the Member State. It also avoids the problem that direct effect of Directives is only possible in vertical actions (Marshall, Dori) whereas the duty of interpretation applies in horizontal actions as well. As you are asked for an evaluation it is important to make a critical assessment of the fairness and usefulness of the doctrine. Cite the case law on the imposition of liabilities (criminal and civil) on individuals. Is this fair when the measure in question has not even been brought into law? Also cite Kolpinghuis and the problem that the doctrine may conflict with general principles of law such as legal certainty and non-retroactivity.


From the standpoint of the Member States, you could cite the example of the UK courts which had considerable difficulty accepting this doctrine. In traditional English constitutional law, Parliament is sovereign and there is the doctrine of separation of powers: national courts do not see themselves as substituting for the legislative prerogative of Parliament. See the cases in Section 6.2, such as Duke, Litster, and the UK court’s eventual acceptance of the doctrine in Webb v EMO Cargo.

In addition, the European Communities Act provides for UK courts to enforce directly effective Union rules – the doctrine of indirect effect does not sit easily with this. It is an example of the tension that exists between the approaches to supremacy of Union law of the European Court on the one hand and the Member States on the other!


Reflect and review







Ready to move on


Need to study again

I can explain the impact of Union law on the national legal systems of Member States.

I can explain how the basic principles governing the relationship between Union and national law (direct effect, indirect effect, supremacy and state liability for breach of Union law) have developed and critically evaluate the legal basis of those principles.

I can evaluate the role of the Court of Justice in developing those principles through the concepts of effectiveness, integration and uniformity.

I can compare the requirements for the enforcement of individual Union law rights under the doctrines of direct effect, indirect effect and state liability.

I can apply these doctrines to problems, advising on the remedies available, and the limitations on those remedies.

I can explain the obligations of the Member States’ authorities (especially national courts) in enforcing Union law.


Must revise

Revision done

6.1 The doctrine of direct effect

6.2 Indirect effect of Directives

6.3 Remedies for Union law rights

6.4 Action for damages against a Member State for breach of Union law

6.5 The supremacy of EU law

6.6 EU law from the Member States’ perspective

7 Article 267 TFEU The preliminary ruling jurisdiction

Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112

7.1 References by national courts for preliminary rulings . . . . . . . . . . 113

7.2 The discretionary reference . . . . . . . . . . . . . . . . . . . . . . . 115

7.3 The compulsory reference . . . . . . . . . . . . . . . . . . . . . . . . 116

7.4 Other aspects of the Article 267 TFEU jurisdiction . . . . . . . . . . . . 120



Introduction

In this chapter we shall consider the Article 267 TFEU preliminary reference procedure and remedies for Union law rights.

In the previous chapter we considered the ways in which individuals can most effectively enforce their Union law rights, through the doctrines of direct effect and supremacy and obtaining effective remedies either based on national procedural rules, or through the doctrine of state liability for breach of Union law. All these doctrines were established by the Court of Justice through the preliminary reference procedure whereby national courts refer questions to the Court of Justice under Article 267 TFEU (ex Article 234 EC). This procedure has been described as ‘the backbone of the Community legal order’ (Case 28-30/62 Da Costa). A national court may make a reference for an interpretation of a point of Union law, or for a ruling on the validity of EU legislation, to the Court of Justice. The Court gives a ruling on the point of Union law only (it should not address questions of national law) and this is then applied by the national court in the case before it in giving its final judgment. The doctrine of supremacy established by the Court of Justice made it clear that the national courts are bound to apply these rulings. The Court also makes it clear, however, that a national court is free to re-refer a question which has been asked before. There is, however, no precedent as the UK courts know it and the Court of Justice is not bound by its own decisions. Nevertheless, the Court frequently refers to its own ‘consistent case law’ and, if it intends to depart from its previous ruling, it will make this very clear and give the reasons for doing so.

Most actions for redress of the breach of Union law rights take place in the national court. As we have seen, there is no uniform set of remedies prescribed by Union law (see Chapter 6) and the remedies available for breach of Union law rights are those available under national law. However, from the beginning, the Court of Justice laid down certain requirements that the national remedy must meet. These were expanded in later case law to include the necessity that the remedy should be adequate and effective and have a deterrent effect.


explain the purpose of Article 267 TFEU and give an account of the procedure

explain what is meant by a ‘court or tribunal’ for the purposes of Article 267 TFEU, with reference to relevant case law

explain when the Court of Justice may refuse to take a reference illustrated by the relevant case law

explain what factors should be taken into account by the national court when deciding whether to make a discretionary reference under the second paragraph of Article 267 TFEU

describe the exception, set out in the CILFIT case, to the requirement to make a reference imposed on national courts against whose decision there is no judicial remedy under national law

cite the case where the Court of Justice decided that national courts may not find Union law invalid

explain how Article 267 TFEU is an alternative way to test the validity of Union law without the restrictive rules on standing under Article 263 TFEU

summarise the Court’s Guidance on References from National Courts for a Preliminary Ruling.

EU Law 7 Article 267 TFEU The preliminary ruling jurisdiction page 113

7.1 References by national courts for preliminary rulings

Essential reading Horspool and Humphreys, Chapter 4: ‘The European Courts: composition,

functions, jurisdiction; preliminary rulings’.

Craig and de Búrca, Chapter 13: ‘Preliminary rulings’, pp.460–500. This is the main chapter. However, also see Chapter 14: ‘Review of legality: access’ and Chapter 15: ‘Review of legality: grounds of review’.

7.1.1 Jurisdiction of the General Court of the European Union The Treaty of Nice gave jurisdiction to the Court of First Instance (CFI) (now renamed the General Court under the Lisbon Treaty) to take preliminary references in certain areas.

Where there is a possibility that the unity of Union law might be jeopardised, the General Court will refer the case to the Court of Justice. The Treaty Article giving the General Court jurisdiction, Article 256 TFEU, specifies that decisions given by the General Court on questions referred for a preliminary ruling may exceptionally be subject to review by the Court of Justice, under the conditions and within the limits laid down by the Statute, where there is a serious risk of the unity or consistency of Union law being affected.

Where the Court of Justice decides to review a decision of the General Court on a question referred for a preliminary ruling, it will decide by an emergency procedure.

7.1.2 Article 267 TFEU The Court of Justice shall have jurisdiction to give preliminary rulings concerning:

the interpretation of the Treaty

the validity and interpretation of acts of the institutions of the Union and of the ECB

the interpretation of the statutes of bodies established by an act of the Council, where those statutes so provide.

Where such a question is raised before a court or tribunal of a Member State, that court or tribunal may, if it considers that a decision on the question is necessary to enable it to give judgment, request the Court of Justice to give a ruling thereon.

Where any such question is raised in a case pending before a court or tribunal of a Member State, against whose decisions there is no judicial remedy under national law, that court or tribunal shall bring the matter before the Court of Justice.

The bulk of preliminary rulings falls under the first indent of paragraph one. The second and third paragraphs deal with the type of ‘court or tribunal’ which either may make a reference (discretionary, paragraph 2), or which must make a reference if the court or tribunal is a court of last resort (compulsory, paragraph 3).

7.1.3 Functions of Article 267 TFEU The function of Article 267 TFEU is to ensure the unity of interpretation of Union law. See: Case 28-30/62 Da Costa en Schaake NV v Nederlandse Belastingadministratie [1963] ECR 31 and Case 166/73 Rheinmühlen [1974] ECR 33.

The preliminary reference system has been very successful. It has depended for its success on the cooperation of the national courts and this has been forthcoming. More than 50 per cent of cases, including many of the most important cases which you will consider, have come to the Court of Justice through an Article 267 TFEU reference, often from courts low down in the national judicial hierarchy (van Gend en Loos and Costa v ENEL for example). It has conferred wider jurisdiction on the national courts within the scope of application of Union law, such as the power given to the UK national courts to judicially review and disapply statutes. This success has, however, led to a long wait – sometimes up to two years – for hearing cases at the Court of Justice.


The decision to refer

The trial judge has discretion as to whether to refer: Case 166/73 Rheinmühlen [1974] ECR 33 but see below, in regard to Article 267(3) TFEU, the compulsory reference.

What is a court or tribunal?

What a court or tribunal is for the purposes of Article 267 TFEU is determined by Union, not national, law. Even if the body or tribunal is not regarded as a court or tribunal under its own national law, it may be a court or tribunal under Article 267 TFEU if it meets certain requirements.

In Case 246/80 Broekmeulen [1981] ECR 2311 the Court of Justice indicated the factors it would take into account. The body in question was an Appeals Committee from the Registration Committee established by the Royal Netherlands Society for the Promotion of Medicine. All GPs (general practitioners) in the Netherlands had to register in order to be able to practise medicine there.

In deciding that it was a court or tribunal for the purposes of Article 267 TFEU, the Court of Justice took into account:

that although the Appeals Committee was a private body and not recognised as a ‘court or tribunal’ under Dutch law, it ‘operate[d] with the consent of the public authorities and with their cooperation’ and it exercised great control over the practice of medicine in the Netherlands

the procedure before the Committee was adversarial

it allowed legal representation

no-one could practise as a doctor in the Netherlands without registration with the Royal Society; decisions of the Appeals Committee therefore have particular importance in regard to the individual’s rights to earn a living

the particular case concerned the qualification of a doctor trained in another Member State; there were likely to be issues raised in the Appeals Committee relating to freedom of establishment and freedom to provide services in Community law

there was no appeal to the national courts from decisions of the Appeals Committee (its decisions were final).

The Court of Justice has indicated the relevant factors – that the ‘court or tribunal’:

is established by law

is permanent

is independent

has compulsory jurisdiction

has procedures that are inter partes

applies rules of law.

Not all these factors have to be satisfied. See a restatement of the relevant factors in Case C-54/96 Dorsch v Bundesbaugesellschaft Berlin [1997] ECR I-4961 and Case 416/96 El Yassini v Secretary of State for the Home Department [1999] ECR I-1209.

In Case 24/92 Corbiau [1993] ECR I-1277 the Court of Justice decided that the Director of Taxation in Luxembourg was not a court or tribunal for the purposes of Article 267 TFEU. The Director of Taxation was hearing an appeal from a decision of the Luxembourg tax authorities. The Court of Justice held that he was not a court or tribunal as he was not independent. He had an institutional connection with those who made the original decision.

Case 102/81 Nordsee [1982] ECR 1095 showed that where the parties have decided by contract that disputes will be referred to an arbitrator and no public authority is involved in the decision to choose arbitration, then that arbitrator is not a court or tribunal for the purposes of Article 267 TFEU.

Go to your study pack and read the extract from Case 246/80 C Broekmeulen v Huisarts Registratie Commissie.

Go to your study pack and read the extract from Case C-54/96 Dorsch Consult Ingenieurgesellschaft GmbH v Bundesbaugesellchaft Berlin GmbH.


Activity 7.1 a. How does the Article 267 TFEU reference procedure ensure the uniformity of EU

law?

b. It has been suggested that, to cut the overload on the Court of Justice, only courts of final appeal should have the power to make references. Why do you think this suggestion has been rejected?

c. Another suggestion was to increase the number of judges in the Court of Justice. Why do you think the Court rejected this?

d. Why did the Court of Justice decide that the question of what is a court or tribunal for the purposes of Article 267 TFEU was to be determined by Union law not national law?

e. Why might it have been important for Dr Broekmeulen that a reference could be made to the Court of Justice of the European Union?

f. Make a list of the factors that are taken into account when deciding whether a body qualifies as a court or tribunal for the purposes of Article 267 TFEU.

7.2 The discretionary reference

7.2.1 Article 267(2) TFEUUnder the second paragraph of Article 267 TFEU, all national courts and tribunals have a discretion to refer.

When to make a reference has been considered in cases in the UK courts. See: Bulmer Ltd v Bollinger SA [1974] 2 WLR in 202, [1974] 2 CMLR 91.

Here Lord Denning laid down guidelines.

The decision on the question of Union law must be conclusive of the case. This follows from the wording of Article 267 TFEU that a ‘decision on the question is necessary to enable it to give judgment’.

The national court can follow a previous ruling of the Court of Justice but it may also resubmit a question in the hope of getting a different ruling.

Where the point is ‘reasonably clear and free from doubt’ it may use the doctrine of acte clair (see below) and not refer.

It is best to establish the facts before making a reference.

These guidelines decide whether a reference is ‘necessary’. The national court still has a discretion which it should exercise with regard to the following guidelines:

Take into account the length of time it takes.

Do not overload the court with too many references.

Formulate the question clearly.

Do not refer the point unless the question is difficult and important.

Bear in mind the expense to the parties of referring a case to the ECJ.

Take into account the wish of the parties and hesitate to refer if one or both of the parties do not wish it.

In Customs and Excise Commissioners v ApS Samex [1983] 1 All ER 1042, 3 CMLR 194, Sir Thomas Bingham MR, while applying Lord Denning’s guidelines, drew attention to the Court of Justice’s expert knowledge of Union law and the ability of the Commission and other Member States to make representations in cases before the Court.

In R v International Stock Exchange ex parte Else 1993 QB 534 CA, Sir Thomas Bingham MR gave a further view on when a referral should be made.


He stated:

if the facts have been found and the Community law issue is critical to the court’s final decisions, the appropriate course is ordinarily to refer the issue to the ECJ unless the national court can with complete confidence resolve the issues itself. If the national court has any doubt it should ordinarily refer.

7.2.2 Guidelines by the Court of Justice The Court of Justice has issued guidelines for national courts on when to make a reference. See: Guidance on References by National Courts for Preliminary Rulings, these have recently been updated. These are included in your Study Pack and it is essential that you are familiar with them. You can also access them at: http://curia.europa.eu

7.3 The compulsory reference

7.3.1 Article 267(3) TFEUUnder the third paragraph of Article 267 TFEU a court or tribunal of a Member State against whose decisions there is no judicial remedy under national law shall bring the matter before the Court of Justice (emphasis added).

The Court of Justice stated in Case 107/76 Hoffman-La Roche v Centrafarm [1977] ECR 957 that:

in the context of Article 177 [now Article 267 TFEU], whose purpose is to ensure that Community law is interpreted and applied in a uniform manner in all the Member States, the particular objective of the third paragraph is to prevent a body of national case law not in accord with the rule of Community law coming into existence in any Member State.

There is uncertainty as to whether what is meant is the court of final appeal in the particular case itself or the highest court against whose judgments there is never a right of appeal – in the UK, the House of Lords.

In the UK, the appellant wishing to make an appeal from the Court of Appeal to the House of Lords has to obtain consent (leave to appeal) of the Court of Appeal and if this is refused, then there is a possibility to apply directly to the House of Lords, which may or may not grant leave to appeal. The issue here is: when the Court of Appeal has refused a right to appeal to the House of Lords, does it become the court of final appeal, required to make a reference under Article 267(3) TFEU? In two cases there was an attempt to clarify this by the Court of Justice; although the facts are similar, they do not appear to solve the dilemma completely as far as the UK is concerned. In Case 99/00 Kenny Roland Lyckeskog [2002] ECR I-4839, it was held that where an appeal was possible to the Swedish Supreme Court, but that court did have a discretion as to whether to take the appeal, the Swedish District Court should not be considered as the court of final appeal for the purposes of Article 234 EC. In Case C-453/00: Kühne & Heitz NV and Productschap voor Pluimvee en Eieren [2004] ECR I-837, the case concerned a ‘final decision’ of an administrative body which was based on a misinterpretation of Union law by a national court at last instance and that court has not referred the question to the Court of Justice for a preliminary ruling. Basing its ruling in particular on the principle of cooperation arising from Article 10 EC (now Article 4(3) TEU), the Court stated:

The principle of cooperation arising from Article 10 EC imposes on an administrative body an obligation to review a final administrative decision, where an application for such review is made to it, in order to take account of the interpretation of the relevant provision given in the meantime by the Court where:

under national law, it has the power to reopen that decision

the administrative decision in question has become final as a result of a judgment of a national court ruling at final instance

Go to your study pack and read Court of Justice Information Note on References from National Courts for a Preliminary Ruling (2005/C 143/01)


that judgment is, in the light of a decision given by the Court subsequent to it, based on a misinterpretation of Union law which was adopted without a question being referred to the Court for a preliminary ruling under Article 267(3) TFEU

and the person concerned complained to the administrative body immediately after becoming aware of that decision of the Court.

The Court of Justice has held that it is not always mandatory for a court of last appeal to refer. First, in an early case, it held that where there had already been an Article 267 TFEU ruling, it was not necessary to refer, although it was always open to the national courts to make another reference on the same or a similar point. See: Case 28-30/62 Da Costa en Schaake NV v Nederlandse Belastingadministratie [1963] ECR 31. This case was heard on the same day as the van Gend en Loos case and the point at issue was very similar. It was probably because the Court considered its ruling in van Gend of such great importance, that it took the opportunity to emphasise this by repeating its ruling on the same day

The Court has laid down what are known as the CILFIT exceptions to the obligation to refer: Case 283/81 CILFIT [1982] ECR 3415.

There is no obligation to refer:

if it is not necessary – that is if the question of Union law will not determine the outcome of the case

where the Court of Justice has already given a ruling on the question – even if the questions at issue are not identical

where the matter is an acte clair.

The Court of Justice stated that the national court or tribunal must be convinced that the matter is equally obvious to the courts of other Member States and to the Court of Justice itself, and that the national court must bear in mind the multilingual nature of Union law.

The Court of Justice stipulated that the national court should compare the different language versions of the particular provision and reminded the national courts that every provision of Union law must be placed in its context and interpreted in the light of Union law as a whole. It was clearly intended to be used rather rarely but in fact it appears that the acte clair doctrine is used quite frequently by national courts of final appeal. See, for example R v International Stock Exchange ex parte Else 1993 QB 534 CA, cited above under 7.2 where Sir Thomas Bingham (as he then was) considered referring but decided the Court of Appeal could resolve the issue itself and that it was acte clair, although this may not be so obvious when one reads the case.

7.3.2 Acte clair and acte éclairéThe French expression acte clair means that the correct application of Union law is so obvious as to leave no scope for any reasonable doubt as to the manner in which the question raised is to be resolved.

Acte éclairé applies where the Court of Justice has already given a clear ruling on the same point in a previous case (see da Costa referred to above). The Court’s Rules of Procedure 2000 and 2001 enable the Court to refuse such a preliminary reference.

State liability for the failure of a court of final instance to make a reference

In this very significant case, Case 224/01 Köbler v Republik Österreich [2003] ECR I-10239, the Court of Justice ruled that an action against a Member State for state liability was possible where the breach of Union law was by a court of final appeal, in particular where it failed to make a reference as required under Article 267(3) TFEU.

The Court of Justice referred to ‘the essential role played by the judiciary in the protection of the rights derived by individuals from Union rules’ and said that ‘the full effectiveness of those rules would be called in question and the protection of those rights would be weakened’ if individuals could not receive reparation for infringement

Go to your study pack and read the extract from Case 283/81 Srl CILFIT and Lanificio di Gavardo SpA v Ministry of Health.

Go to your study pack and read Wattel, P. J. ‘Köbler, CILFIT and Welthgrove: We Can’t Go On Meeting Like This’, CMLRev 41:177-190, 2004.


of Union law by the decision of a court of a Member State adjudicating at last instance. It pointed out that there is no further possibility of protection of the rights of individuals beyond the decision of such a court so ‘individuals cannot be deprived of the possibility of rendering the state liable in order in that way to obtain legal protection of their rights’.

It is in order to prevent the infringement of Union law rights that courts from whose decision there is no judicial remedy are obliged to make a reference under Article 267(3) TFEU. Where they fail to do so, an action for state liability must be available.

The question of liability would depend on the established criteria for state liability, but:

State liability for an infringement of Community law by a decision of a national court adjudicating at last instance can be incurred only in the exceptional case where the court has manifestly infringed the applicable law. [emphasis added]

The national court deciding the issue of state liability would apply the usual conditions for state liability (see Chapter 6).

Did the rule of Union law that was infringed confer rights on individuals?

Was the breach sufficiently serious?

Was there a direct causal link between the breach and the loss or damage sustained by the injured parties?

The question of whether the infringement of Union law was sufficiently serious when caused by a decision of a national court was to be determined by whether the ‘infringement was manifest’. In deciding what this meant, regard had to be given to the specific nature of the judicial function and to the legitimate requirements of legal certainty. Therefore, in order to determine whether the infringement was ‘manifest’, the national court must take account of all the factors which characterise the situation put before it.

The Court of Justice continued that:

those factors include, in particular, the degree of clarity and precision of the rule infringed, whether the infringement was intentional, whether the error of law was excusable or inexcusable, the position taken, where applicable, by a Community institution and noncompliance by the court in question with its obligation to make a reference for a preliminary ruling under the third paragraph of Article 234 EC [now Article 167 TFEU].

In any event, an infringement of Community law will be sufficiently serious where the decision concerned was made in manifest breach of the case law of the Court in the matter. (paragraphs 55 and 56)

Nevertheless, on the facts presented in the particular case, there was not a ‘manifest infringement’ of Union law.

The Köbler judgment was further refined in two recent cases. In Case C-173/03 Traghetti del Mediterraneo v Repubblica Italiana [2006] ECR I-5177 the Italian court (Tribunale di Genova) asked whether state liability of a Member State towards an individual for harm caused by violation of Union law by a supreme court would be excluded if the violation arose from an interpretation of the national law, or an assessment of the facts and the evidence, and whether state liability therefore should only be incurred in case of fault or serious negligence. The Court and stated that:

Community law precludes national legislation which excludes state liability… for damage caused to individuals by an infringement of Community law attributable to a court adjudicating at last instance by reason of the fact that the infringement in question results from an interpretation of provisions of law or an assessment of facts or evidence carried out by that court.

Union law also precluded legislation which limited such liability solely to cases of intentional fault and serious misconduct on the part of the court ‘if such a limitation were to lead to exclusion of the liability of the Member State concerned in other cases where a manifest infringement of the law was committed’. However, in Case


C–511/03 Staat der Nederlanden (Ministerie van Landbouw, Natuurbeheer en Visserij) v Ten Kate Holding Musselkanaal BV [2005] ECR I-8979 the claimants alleged that they had suffered loss as a result of a failure by the Commission to give an authorisation under a Commission concerning certain protection measures with regard to bovine spongiform encephalopathy (‘Mad Cow Disease’) and the feeding of mammalian-derived protein. They sought compensation from the Netherlands on the ground that the state had erred in not having brought proceedings against the Commission under Article 232 EC (now Article 265 TFEU). The Court ruled under a preliminary reference by the Hoge Raad, the Dutch Supreme Civil Court, that Community law did not impose any obligation on a Member State to bring, for the benefit of one of its citizens, an action against an EC institution under Article 263 TFEU (ex Article 230 EC) for annulment of an act adopted by the institution, or under Article 265 TFEU (ex Article 232 EC) for failure to act, although it did not in principle preclude national law from providing for such an obligation.

Activity 7.2a. Explain the difference between Article 267(2) and Article 267(3) TFEU.

b. Summarise the main guidelines set by the Court of Justice in its Guidance on References by National Courts for Preliminary Rulings. (See Study Pack)

c. Can you distinguish between the approach of Lord Denning in Bulmer v Bollinger and Sir Thomas Bingham MR in the two cases in which he expressed a view on when to make a reference.

d. As the law stands now, when must a national court from whose decision there is no judicial remedy make a reference?

Activity 7.3Markus has recently qualified as an independent financial advisor in the UK. He belongs to the Independent Financial Advisors Association (IFAA) which is an independent trade association, partly financed by the UK government. The IFAA ensures that its members observe UK law on the regulation of financial services and has powers under statute to notify the relevant UK government department of any breach by its members so that the FSA can take action.

The IFAA has discovered that Markus has been sending pamphlets advertising his services to potential customers in France and Germany. The IFAA rules prohibit any advertising of services by its members. Markus has been summoned to a disciplinary hearing in front of a committee of three senior members of the IFAA,which intends to recommend termination of his membership. This will make it difficult for him to attract customers.

Markus claims that there is an issue of Union law which needs to be resolved and has asked the committee to refer the matter to the Court of Justice. The committee has refused, saying that it has no jurisdiction to make a reference and, in any case, it is clear that there is no issue of Union law which is relevant. There is the possibility of an appeal to the High Court if the person seeking it has been an accredited member of the IFAA for two years but Markus has only been a member of the IFAA for 15 months.

Advise the committee.


7.4 Other aspects of the Article 267 TFEU jurisdiction

7.4.1 Invalidity of Union legislation Only the Court of Justice has jurisdiction to find EU legislation to be invalid. See: Case 314/85 Firma Fotofrost v HZA Lübeck Ost [1987] ECR 4199, [1988] 3 CMLR 57.

If the Court of Justice finds Union legislation void, then all national courts must also regard that act as void. See: Case 66/80 ICI v Amministrazione delle Finanze dello Stato [1981] ECR 1191.

Interim relief

On the granting of interim relief where there is a challenge to national measures based on the purported invalidity of the parent Union legislation, see: Zuckerfabrik Süderdithmarschen AG v Hauptzolamt Itzehoe [1991] ECR I-415. The national court may suspend national measures being challenged on the grounds of the validity of a Union law measure.

Refusal by Court of Justice to give a ruling

The Court of Justice has refused to give a ruling where there is no genuine dispute between the parties. See: Case 104/79 Foglia v Novello [1980] ECR 745, [1981] 1 CMLR 585 and Case 244/80 Foglia v Novello (No 2) [1981] ECR 3045, [1982] 1 CMLR 585. The Court stated that it:

must display special vigilance when… a question is referred to it with a view to permitting the national court to decide whether the legislation of another Member State is in accordance with Community law.

See also: Case 318/00 Bacardi-Martini SAS v Newcastle United Football Company Ltd [2003] ECR I-905 and Case 83/91 Meilicke [1992] ECR I-4871. These cases show that the Court of Justice asserts the right to control and limit its jurisdiction under Article 267 TFEU. The Court has also refused to give a ruling where very little information or explanation is offered by the national court. See: Case 320-322/90 Telemarsicabruzzo SpA v Circostel [1993] ECR I-393.

Effect of preliminary ruling

The Court of Justice has limited the retrospective effects of its judgments in some cases. See, for example, Case 43/75 Defrenne v Sabena (No 2) [1976] ECR 455.

Activity 7.4 a. Explain why the Court of Justice ruled that only it could find EU law invalid in

Fotofrost.

b. Why did the Court of Justice refuse to take the reference in Foglia v Novello?

c. Do you think that the Article 267 TFEU reference procedure is important for the effectiveness and uniformity of Union law? If so, why?

d. How could the CILFIT judgment be criticised in relation to these two principles?

e. Why is interim relief an important remedy?

Sample examination questions Question 1 Distinguish situations in which a court may make reference under Article 267 TFEU from ones in which a reference must be made.

Question 2 It is often said that the effectiveness of the Article 267 TFEU (preliminary reference) procedure depends upon a degree of cooperation between the Court of Justice and national courts. Assess with reference to case law, whether or not an appropriate level of cooperation has been achieved.


Advice on answering the questions Question 1 This question should start off with an account of what the Article 267 TFEU reference procedure is, how it operates and what is its purpose. So it should explain that where a case in a national court raises a point of EU law, the national court may make a reference to the Court of Justice for a ruling on the interpretation (or validity) of EU law, but it is for the national court to apply the ruling to the case before it and to decide the outcome of the case. The Court of Justice cannot decide questions of national law. The aim is to ensure the uniformity of EU law across the EU. Then explain that making a reference is at the discretion of the national court which may make a reference if it feels it is necessary under Article 267(2) TFEU. However under Article 267(3) TFEU a court ‘against whose decisions there is no judicial remedy under national law ‘shall’ make a reference, in other words, must make a reference. Then consider what the national court making a reference under the discretionary reference on Article 267(2) TFEU should take into account, citing Lord Denning’s judgment in Bulmer v Bollinger and Sir Thomas Bingham MR’s judgment in R v International Stock Exchange ex parte Else. What is of particular importance here is the Court of Justice’s Guidance to National Courts, the most important principles of which should be described.

Reference should be made to the fact that there is no formal system of precedent in the Court of Justice, but that its rulings under Article 267 TFEU are binding on national courts and have to be applied under the doctrine of supremacy of Union law over national law. The Court is not bound by its own judgments, but, in practice, it cites its own ‘consistent case law’ and will make it very clear if, on rare occasions, it reverses a previous ruling. Then Article 267(3) TFEU should be discussed, explaining that it is not clear whether the court of final appeal of the legal system itself or in the case at issue that is intended. Very good answers may discuss Case 99/00 Kenny Roland Lyckeskog and Case C-453/00 Kühne & Heitz. The CILFIT case and the exceptions should be described, explaining what is meant by acte clair and acte éclairé. There is the possibility for a national court to decide to bypass EU law by deciding not to make a reference; up to now, there has been no action that could be taken in such a case but the ruling in Köbler (although negative in this case) opens up the possibility of an action for state liability because of the decision of a national court.

Question 2 This question should start off, as Question 1 above, with an account of the purpose and operation of Article 267 TFEU, including a reference to the Guidelines. It should then discuss the importance of the cooperation of the national courts, their willingness to make references, as being essential for the penetration of Community law into the national legal system.

Article 267 TFEU has been essential for the uniformity and effectiveness of Union law.

The national courts have shown a willingness to cooperate, with many references being made. The fact that the most significant constitutional judgments have arisen from Article 267 TFEU references should be mentioned, citing cases such as van Gend, Costa v ENEL, and Francovich. The importance of direct effect as a way of individuals enforcing their EU law rights in the national courts must be discussed – very good answers might mention the principle of ‘dual vigilance, established in van Gend – with reference to how essential it is that national courts are able to make Article 267 TFEU references for rulings on the interpretation of Union law. The series of cases developing principles ensuring the effectiveness of Union law (direct effect, indirect effect, state liability) have arisen out of the numerous references made by national courts. Articles 34, 45, 49, 56, 101(1), 101(2) and 102 TFEU all have direct effect and can therefore be enforced by actions in the national courts, which often require clarification of the relevant Union law by way of an Article 267 TFEU reference.

With indirect effect, the Court of Justice made a particular demand on the national courts to interpret national law in the light of the wording and purpose of Union law citing Article 4(3) TEU, although the Article does not mention national courts.

Foglia v Novello could be mentioned illustrating that while Article 267 TFEU references are at the discretion of the national court, the Court of Justice does control its own jurisdiction and is not a passive recipient of references.


The importance of the possibility of seeking judicial review of EU legislation through an Article 267 TFEU reference could be mentioned, referring to the difficulty encountered by individual applicants in establishing individual and direct concern under Article 263 TFEU.

The wording of Article 267 TFEU laid down a requirement that courts of final appeal should make a reference where a question of Union law was raised in proceedings before them. Exceptions to this obligation were set out in the CILFIT case, but the Köbler case makes it clear that the Court of Justice will no longer leave the exercise of the discretion given to the national courts under these exceptions unscrutinised. You could conclude that the willingness of the national courts to make references has contributed to the two year wait to receive a preliminary ruling from the Court.


Reflect and review







Ready to move on


Need to study again

I can explain the purpose of Article 267 TFEU and give an account of the procedure.

I can explain what is meant by a ‘court or tribunal’ for the purposes of Article 267 TFEU, with reference to relevant case law.

I can explain when the Court of Justice may refuse to take a reference illustrated by the relevant case law.

I can explain what factors should be taken into account by the national court when deciding whether to make a discretionary reference under the second paragraph of Article 267 TFEU.

I can describe the exception, set out in the CILFIT case, to the requirement to make a reference imposed on national courts against whose decision there is no judicial remedy under national law.

I can cite the case where the Court of Justice decided that national courts may not find Union law invalid.

I can explain how Article 267 TFEU is an alternative way to test the validity of Union law without the restrictive rules on standing under Article 263 TFEU.

I can summarise the Court’s Guidance on References from National Courts for a Preliminary Ruling.


Must revise

Revision done

7.1 References by national courts for preliminary rulings

7.2 The discretionary reference

7.3 The compulsory reference

7.4 Other aspects of the Article 267 TFEU jurisdiction


Notes

8 Article 258 TFEU Enforcement actions

Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126

8.1 Direct actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127

8.2 Article 258 TFEU enforcement action . . . . . . . . . . . . . . . . . . . 127

8.3 Defences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131

8.4 Enforcement: Article 260 TFEU . . . . . . . . . . . . . . . . . . . . . . 134



Introduction

The next three chapters cover actions before the Court of Justice of the European Union. In Chapter 3 we referred to the fact that there are:

direct actions before the Court: Articles 258, 259, 260, 263, 265, 268 and 340 TFEU (ex Articles 226, 227, 228, 230, 232, 235, 288 EC)

references for preliminary rulings from the national courts: Article 267 TFEU (ex Article 234 EC).

The direct actions which may be brought against Member States in breach of their Union law obligations under Articles 258 and 259 TFEU (ex Articles 226 and 227 EC) are addressed in this chapter.

A Member State may take action against another Member State in breach of its Union law obligations under Article 259 TFEU but in practice these actions are very rare. Most of the chapter concerns the jurisdiction of the Commission which, in its role as ‘Guardian of the Treaties’ polices the Member States’ compliance with EU law. The Article 258 TFEU procedure is intended to reach a negotiated settlement but, if this is not possible, the Commission will take the Member State before the Court of Justice. The Court considers the legal issues de novo (afresh) and determines whether or not the Member State is, indeed, in breach of EU law. If it is, the Court is empowered to make a ‘Declaration’ that the Member State is in breach of its Union law obligations. In the past, this proved ineffective, as many Member States simply ignored the Court’s Declaration and continued in their failure to comply with EU law. The procedure was considerably strengthened by the addition, in the Maastricht TEU, of a new paragraph to Article 228 EC (now Article 260 TFEU). This enables the Commission to bring a new, separate, action against a Member State which has failed to comply with the Court’s judgment under the Article 258 TFEU action, and, if the Commission brings the Member State before the Court of Justice under Article 260 TFEU, the Court may impose substantial fines.

Because the Article 258 TFEU action takes so long (four or five years to reach the Court), there is the possibility of interim relief under Article 279 TFEU (ex Article 243 EC).


state which are the direct actions before the Court of Justice of the European Union

give an account of the principles governing the use of Article 258 TFEU

in regard to Article 258 TFEU, outline the procedures that the Commission follows when taking action under this Article

explain that the Article 258 TFEU action is part of the Commission’s role as ‘Guardian of the Treaties’ and explain the role of the Court of Justice in an Article 258 TFEU action

give an account of the most important cases where defences have been raised by the Member States

state the tests for interim relief under Article 279 TFEU

evaluate the advantages and disadvantages of an Article 258 TFEU action

explain why the second part of Article 260 TFEU was added to the EC Treaty by the Maastricht TEU

explain why the final paragraph of Article 260 TFEU was added by the Lisbon Treaty

give an account of the Article 260 TFEU action with reference to the factors which are taken into account by the Court of Justice when setting fines.

EU Law 8 Article 258 TFEU Enforcement actions page 127

8.1 Direct actions

The direct actions brought in the Court of Justice (or, in regard to Articles 263 and 265 TFEU in the General Court) are as follows.

Actions against Member States

Article 258 TFEU: Actions by the Commission against Member States for possible breaches of their duties under EU law.

Article 260 TFEU: Another action by the Commission if the Member State fails to comply with an Article 258 TFEU declaration by the Court of Justice.

Article 259 TFEU: Action by one Member State against another for breach of Union law obligations.

Actions against the Union institutions

Actions for damages: Articles 268/340 TFEU (ex Articles 235/288 EC): Actions for damages by individuals against the Union institutions.

Challenges to legality of acts of the institutions: Article 263 TFEU: Action for judicial review.

Action for failure to act: Article 265 TFEU: Action for failure to act against Union institutions.

8.2 Article 258 TFEU enforcement action

Essential reading Horspool and Humphreys, Chapter 8: ‘Enforcement of Union law by the

institutions’, sections 8.1–8.18, pp.242–253.

Craig and de Búrca, Chapter 12: ‘Enforcement actions against Member States’, pp.428–448.

Actions against Member States are designed to ensure that Member States fulfil their Treaty obligations. They may be brought by the Commission under Article 258 TFEU or by a Member State under Article 259 TFEU.

8.2.1 Action by the Commission Article 258 TFEUThe Commission was described in Chapter 3 as the Guardian of the Treaties, reflecting its duty under Article 17 TEU to ‘ensure the application of the Treaties, and of measures adopted by the institutions pursuant to them’ and to ‘oversee the application of Union law under the control of the Court of Justice of the European Union. When we consider Article 258 TFEU, we are looking at the original procedure set out in the Treaty of Rome 1957 to ensure that Member States complied with their obligations under Community law. Under the original scheme of the Treaty, this was the only method of ensuring compliance by Member States. The nature of the action reflects the original status of the Treaty of Rome as an international treaty, a creation of international law, under which, as is usual in international law, mechanisms for enforcement are weak. Compliance was meant to be achieved by discussion and negotiation between the Commission and the Member State, and the enforcement mechanism lacked ‘bite’.

If a Member State could not be brought into line during the administrative stage of the Article 258 TFEU procedure by informal consultation, it would be taken by the Commission before the Court of Justice, but the only ‘penalty’ for a Member State found to be in breach of its Community law obligations by the Court, was a ‘Declaration’ that it was in breach of its Community law obligations. Member States frequently ignored such Declarations. This procedure was significantly strengthened by an addition to Article 228 EC (now Article 260 TFEU) by the Maastricht TEU which permits another action by the Commission against a Member State which has failed


to comply with an Article 258 TFEU judgment of the Court. This Article originally only instructed the offending Member States to take the necessary measures to comply with the judgment. The Maastricht TEU added the possibility for the Commission to institute another action for infringement before the Court of Justice if Member States failed to comply with its first judgment, providing for penalties to be imposed on the offending Member State.

Although this procedure was incorporated into the EU legal order by the Maastricht TEU, the first fines were imposed a number of years later, reflecting the time taken by these procedures.

However, well before the addition to Article 228 EC was introduced, the Court had acted to help ensure compliance by Member States with their Union law obligations by another means – the development of the principle of direct effect (see Chapter 6). This enables individuals, under the conditions set out in the case law, to directly enforce their rights under EU law even when their Member State has failed to legislate to comply with its duties under EU law. Article 258 TFEU and direct effect comprise the system of ‘dual vigilance’ referred to by the Court of Justice in the van Gend judgment.

We have also seen (6.4 in Chapter 6), that the Court developed the principle of state liability,† whereby individuals could sue a Member State which had failed to comply with its Union law obligations, where that failure had caused the applicant loss or damage. Both direct effect and state liability have advantages for an individual who has been caused loss by the failure of the Member State to comply with its obligation under EU law because, if successful, the individual has the possibility of a remedy. Although a complaint to the Commission resulting in an action under Article 258 TFEU costs the individual nothing, they do not receive a remedy from the action (or from the Article 260 TFEU action) directly, although it is now accepted that a finding by the Court of Justice that a Member State is in breach under Article 258 TFEU will facilitate an action under state liability for the individual.

8.2.2 Causes of Article 258 TFEU actionActions by the Commission can be started on its own initiative where it has observed a possible breach.† However, the most common instigation of an Article 258 TFEU action is a complaint from an individual or company. They can also be started in response to questions raised in the European Parliament, questions from NGOs or interest groups or in response to investigations by newspapers.

The most common breach of EU law obligations by the Member State is non-implementation, faulty implementation or non-application of secondary legislation. Very often it is the non-implementation of a directive within the allotted time limit.

The failure of a Member State to fulfil its Treaty obligations may be either an act or an omission. An example of failure is when a Member State maintains in force national legislation that is contrary to the Treaty – such as a nationality requirement or barriers to imports from other Member States. See: Case 1/00 Commission v France [2001] ECR I-9989. France was in breach of Community law because of its refusal to permit the marketing of correctly marked or labelled British beef on French territory. This was because of fears of a threat to public health caused by the outbreak of BSE in British cattle.

A Member State is liable for the conduct of public agencies, even if they are constitutionally independent. See: Case 249/81 Commission v Ireland (Buy Irish) [1982] ECR 4005.

Although Article 258 TFEU involves action against a Member State, the Court has also held that a Member State can be liable for failing to prevent actions by individuals which impede free trade.

In Case 265/95 Commission v France [1997] ECR I-6959, the Court upheld an action brought by the Commission against France for violation of Article 28 EC (now Article 34 TFEU). France had failed to prevent private individuals impeding imports of agricultural produce from other EU countries by their violent and disruptive behaviour which

† For further details, including the conditions under which the principle of state liability can be used by the individual, see Chapter 6.

† Sometimes an action is initiated by the Commission because Union legislation is unclear. The action is then designed to determine the nature of the obligations of Member States, especially in the case of differences of interpretation.


obstructed lorries from bringing in imported goods. The French authorities took insufficient action to prevent these attacks. The French police sometimes failed to arrive to take action against such protests even when given advance warning of the attacks. Even when they outnumbered the protesters, the French police frequently stood by and did not intervene. Although the protesters could be identified from photographs and video footage, prosecutions were not brought.

The Court of Justice held that although the actions of private individuals impeding imports were not caught by Article 28 EC (now Article 34 TFEU), the French government was in breach of Article 28 EC for failing to take effective action to ensure free movement of goods in their country, even when the obstructions were caused by private parties. Contrast this case with Case 112/00 Schmidberger v Austria [2003] ECR I-5659 (see 8.3.1).

The Commission often refers to the Member States’ obligation of ‘sincere cooperation’ under Article 10 EC† (now Article 4(3) TFEU) to underpin an action under Article 226 EC (now Article 258 TFEU).

Activity 8.1a. What is the purpose of the Article 258 TFEU action?

b. Explain why the Article 258 TFEU is an important part of the Commission’s duties under Article 17 TEU.

c. What is the principal weakness of this procedure? How does this weakness affect the principles upheld by the Court of Justice of the uniformity and effectiveness of EU law.

d. What is meant by the principle of ‘dual vigilance’? Whose vigilance is being referred to here?

e. Explain how direct effect is an effective way of compensating for the weakness of the Article 258 TFEU enforcement.

f. When, and how, was the Article 258 TFEU procedure strengthened?

g. Do you think this was an effective way of achieving this?

The Commission’s discretion

The Commission cannot be made to initiate action under Article 258 TFEU by an Article 265 TFEU (failure to act) action by a non-privileged applicant: Case 247/87 Star Fruit v Commission [1989] ECR 291. It has absolute discretion on whether to start the Article 258 TFEU procedure and whether to take a case to the Court of Justice. See: Case 207/97 Commission v Belgium [1999] ECR I-275.

The decision not to make a reasoned opinion and the decision not to submit a case to the Court have been held to be not reviewable under Article 258 TFEU as they are not acts that have legal effects: Case 48/65 Alfons Lütticke [1966] ECR 19.

The aim of the Article 258 TFEU procedure is to reach a settlement without recourse to the Court:

(T)he object of the infringement procedure laid down by the TFEU is to cause Member States to rectify infringement proceedings before coming to the litigation stage proper. (14th Annual Report [1997] OJ C 332/9).

† Under Article 4(3) TEU, ‘Member States shall take any appropriate measure… to ensure fulfilment of the obligations arising out of the Treaties or resulting from action taken by the institutions of the Union. They shall facilitate the achievement of the Union’s tasks. They shall refrain from any measure which could jeopardise the attainment of the Union’s objectives.’


8.2.3 Infringement proceedingsThe proceedings under Article 258 TFEU consist of an administrative stage and a judicial stage.

Administrative stage

1. The Commission sends an informal letter to the Member State, stating that it appears to be in breach of its Union law obligation and that under Article 4(3) TEU it is under a duty to cooperate. The Member State responds and the aim is to resolve the problem by amicable negotiation. About one third of cases are resolved at this stage.

2. If the response is not satisfactory, the Commission issues a letter of formal notice stating that the Member State is in breach and inviting its observations. The Member State is informed of all the charges against it. It is given the opportunity to respond. Once the Member State has submitted its observations, another third of cases are settled at this point.

The opportunity of a Member State to submit observations prior to the delivery by the Commission of a reasoned opinion is an essential procedural requirement under Article 263 TFEU. See: Case 51/83 Commission v Italy [1965] ECR 857 at p.865.

A Member State is not obliged, however, to submit observations. There is no specified time limit between the invitation and the reasoned opinion, and the Commission’s invitation to submit observations usually leads to negotiations.

3. If settlement is not reached then the Commission issues a reasoned opinion – and this marks the end of the administrative or informal stage. The reasoned opinion states the grounds of fact and law for the Commission’s view that the Member State has infringed its Treaty obligations.

It defines the subject matter of the dispute which the Court of Justice may be called upon to resolve. The Commission must give a full statement of reasons behind its allegation that the Member State is in breach and must inform the Member State of what it must do to comply and bring the infringement of the Treaty to an end. The time limit is normally two months.

The Commission’s reasoned opinion determines the subject matter of the judicial stage. The Commission cannot add further complaints before the Court of Justice that were not included in the reasoned opinion. The Commission’s case, as laid down in the reasoned opinion, forms the basis of the judicial stage of the proceedings. The Commission cannot change the substance of its case against the Member State once the reasoned opinion has been issued. See: Case 52/90 Commission v Denmark [1991] ECR I-2187 and Case 7/69 Commission v Italy [1970] ECR 111.

The reasoned opinion indicates ways of terminating the infringement and sets a time limit for compliance – usually two months. The time given must be reasonable. See: Case 293/85 Commission v Belgium [1988] ECR 305 and Case 85/85 Commission v Belgium [1986] ECR 1149.

If the Member State remedies the breach after expiry of the time limit imposed by the Commission, it may still be taken before the Court of Justice. See: Case 7/61 Commission v Italy [1961] ECR 317 and Case 240/86 Commission v Greece [1988] ECR 1835. In this case against Greece, it was also held that a short breach may still be serious.

The purpose of the administrative stage is to allow the Member State to explain its apparent non-compliance with EU law or to have the opportunity to remedy it: Case 5/85 Commission v Belgium [1986] ECR 1149. If this fails, the matter then moves to the judicial stage.


Judicial stage

If the Member State fails to comply, the Commission may bring the matter before the Court of Justice. This is the beginning of the judicial stage. The decision to commence judicial proceedings rests within the Commission’s discretion, which cannot be challenged by judicial review proceedings. See: Case 45/65 Lütticke [1966] ECR 19.

The Commission cannot, however, authorise a Member State to maintain in force a system not in accordance with Union law. See: Joined Cases 142–143/80 Essevi [1981] ECR 1413.

Activity 8.2a. It is said that the purpose of the Article 258 TFEU procedure is to reach an

amicable settlement. Explain how the administrative stage procedure facilitates a friendly settlement.

b. What is the ‘reasoned opinion’?

c. Why do you think the Court of Justice has ensured the discretion of the Commission in deciding whether to start an action and in whether to take it to the Court?

d. Why should an action still be brought before the Court even if the Member State has remedied the breach but has done so after expiry of the time limit?

e. List the steps taken by the Commission in taking an action under Article 258 TFEU.

8.3 Defences

Essential reading Horspool and Humphreys, Chapter 8: ‘Enforcement of Union Law by the

Institutions’, sections 8.19–8.30, pp.254–261.

Craig and de Búrca, Chapter 12: ‘Enforcement actions against Member States’, pp.428–448.

Few of the numerous reasons advanced by Member States for failing to comply with Union law have been accepted by the Court of Justice.

8.3.1 Examples of reasons given by Member States

Reciprocity

In Cases 90 and 91/63 Commission v Luxembourg and Belgium (Re Import of Powdered Milk Products) [1964] ECR 621, it was argued that the breaches would have been legal but for the lack of required action by the Community itself.

The Court held that the argument of reciprocity was not applicable in the context of Community law as it was a new legal order which was not limited to creating reciprocal obligations as under international law.

Other Member States in breach

Case 146/89 Commission v United Kingdom [1991] ECR 3533 was one of a number of cases where this defence has been rejected.

Force majeure

In Case 101/84 Commission v Italy (Re Transport Statistics) [1985] ECR 2629 under a Community directive Italy was obliged to produce annual transport statistics. It failed to do so and pleaded force majeure on the grounds that the data processing centre had been bombed. However, although this might have been arguable, it was held that a delay of 4½ years was not acceptable. The Court held that ‘time will erode the validity of the excuse’.


In Case 77/69 Commission v Belgium [1970] ECR 237, the Belgian government had drafted and put before its Parliament a law amending a tax provision. However, the dissolution of Parliament had caused the draft legislation to lapse before it could be enacted. An argument that because of the separation of powers the government could not require the legislation to be passed was rejected by the Court. It did not matter which agency of the state was responsible for the action or inaction which caused the breach.

Internal difficulties

The UK, in Case 128/78 Commission v UK (tachographs) [1980] ECR 417 pleaded its difficulties with trade unions and the threat of a general transport strike as its defence for its failure to apply a Regulation requiring the compulsory use of tachographs in long distance lorries. Instead, it introduced a voluntary system. The Court rejected this defence on the grounds that internal difficulties were not the Community’s concern.

Non-applicability of the offending law

Case 167/73 Commission v France (French Merchant Seamen) [1974] ECR 359. A rule in the French code maritime laid down that there should be three French seamen employed for every foreign seaman for certain jobs. France argued that the law was not enforced in practice against EU nationals, but this was not accepted because it gave rise to uncertainty about legal rights.

The Union measure is illegal

In Case 226/87 Commission v Greece [1988] ECR 3611 the contested measure was a decision addressed to the Member State. The Court rejected this defence because the appropriate remedy within ‘the system of remedies set up by the Treaty’ was an action for judicial review under Article 230 EC (now Article 263 TFEU). However, this defence might be considered where the Union measure in question was a Regulation, the illegality of which was not apparent until the initiation of enforcement procedures.

Adequate implementation of the EU law by administrative measures

Where the allegation is inadequate implementation of EU law, the Court rarely accepts a Member State’s defence (see Case 128/78 Commission v UK (tachographs) and Case 167/73 Commission v France above). However, the fact that the administrative measures used to implement the EU measure were widely publicised and not easily subject to alteration was accepted as a defence by the Court in Case 29/84 Commission v Germany (Re Nursing Directives) [1985] ECR 1661, [1986] 3 CMLR 579.

Protection of fundamental human rights

A Member State will be able to plead protection of fundamental rights, such as freedom of expression, as a defence where its failure to intervene to prevent demonstrations has caused an impediment to free movement of goods.

This possibility was established in the Case 112/00 Schmidberger v Austria [2003] ECR I-5659 although the case itself concerned an action for damages in state liability against the Austrian government. Schmidberger v Austria concerned a claim for state liability damages against Austria by Schmidberger, an international transport company, to recover losses incurred when five lorries of the company were prevented from transporting goods from Germany to Italy because of a demonstration that lasted almost 30 hours. The Austrian authorities had permitted the demonstration, which was lawful under national law and which sought to highlight threats to the environment and public health caused by increased traffic; they had taken measures to minimise disruption to traffic. The company sought damages on the grounds that, by not banning the demonstration, the Austrian government had breached EU law.

The Court held that the Austrian authorities were motivated by a desire to protect freedom of expression and freedom of assembly which are fundamental human rights guaranteed by the ECHR which are to be protected by the EU according to the TEU. The protection of these rights is a legitimate interest which, in principle can justify


restrictions of the obligations imposed by EU law, even a fundamental freedom, such as the free movement of goods. Because these rights are not, however, absolute but subject to limitation in the public interest, a proportionality test needed to be applied.

The Court concluded that the ‘legitimate aim of that demonstration could not be achieved in the present case by measures less restrictive of intra-community trade’ and therefore the decision not to ban the demonstration was justified and proportionate and did not breach Article 28 EC (now Article 34 TFEU). It was therefore unnecessary to consider the question of state liability as there was no breach of Community law.

A number of commentators have opined that this could have been justified on the grounds of public policy rather than creating a new mandatory requirement.

Activity 8.3 The EU has issued a Directive requiring all Member States to implement a legally binding regulatory regime with regard to workers in the nuclear power industry, to ensure that they are not put under undue stress which might lead to accidents.† The Directive requires that nuclear power plants install a computerised system for clocking in and out to make sure that workers do not work too many hours. It also requires them to install a new kind of decontamination shower system.

The UK government has heard that the German and French governments are not intending to comply with the requirement for decontamination units. The UK Minister for Energy commissioned a report, which concluded that the cost of implementing the new decontamination regulations would make the UK uncompetitive compared with France and Germany if these countries do not enforce these rules. The trade unions also warned the UK government of major disruption, if nuclear workers are discriminated against by being forced to clock in and out.

The UK government introduces administrative guidelines which state that workers must endeavour to keep a personal journal recording the time when they enter and leave work which will be inspected by the plant manager on an ad hoc basis. Notices reminding the workers of this must be prominently displayed in the work place. No decontamination units are installed.

The UK government claims that:

the decontamination units have not been installed because the only factory capable of manufacturing them to the required standard suffered a major fire two years ago and is still being rebuilt

in any case, as Germany and France are not intending to introduce the decontamination programme, the UK will be put at a disadvantage if it does introduce the programme

it is not practical to introduce a computerised clocking in system as this would be very expensive; the administrative guidance enforcing a voluntary scheme will be adequate.

Questions

a. What action might be taken against the UK by the Commission?

b. Referring to relevant case law, evaluate the likely outcome for the UK government.

8.3.2 Interim reliefThe commencement of the judicial stage enables the Commission to apply for interim measures under Article 279 TFEU (ex Article 243 EC). Such interim measures are not available prior to the commencement of an action. See Article 279 TFEU and Case 246/89R Commission v United Kingdom (Re Merchant Shipping Rules) [1989] ECR 3125.

† Develop an answer to this problem question which deals with failure to comply with EU Directives.


In order for interim relief to be granted, it is necessary to establish that:

there is a matter of urgency, measured as to whether there is a danger of serious and irreparable harm

there are factual and legal grounds to raise a prima facie justification for the interim measure.

Note that from commencement of proceedings under Article 258 TFEU to the final judgment in the Court of Justice typically takes four to five years.

8.3.3 Actions between Member States – Article 259 TFEUThe intermediary role of the Commission is crucial in avoiding potential political difficulties between Member States. Only two cases have been brought so far under Article 227 EC (now Article 259 TFEU) – see Case 141/78 France v United Kingdom [1979] ECR 2923 and Case 388/95 Belgium v Spain [2000] ECR I-3123.

8.4 Enforcement: Article 260 TFEU

The result of an action under Article 258 or Article 259 TFEU is a declaration that the Member State has failed to fulfil a Treaty obligation, specifying the source of the infringement. In many cases, a Member State has either refused to comply with a Court judgment or has ignored it. The deterrent effect of action by the Commission has been considerably strengthened by the inclusion of a new power under Article 260 TFEU to levy fines against Member States which have failed to comply with an Article 258 TFEU ruling finding them in breach of their Union law obligations. This was added to the Treaty of Rome by the Treaty on European Union in Maastricht.

Financial penalties still cannot be imposed under an Article 258 TFEU, but they can be levied in the subsequent Article 260 TFEU proceedings for failure to comply.

Under Article 260 TFEU, the Commission gives the State an opportunity to submit observations before it issues a reasoned opinion setting out how the Member State has failed to comply with the Court’s declaration under Article 258 TFEU that the Member State is in breach of its Union law obligations. The Commission gives a time limit for compliance and, if the Member State does not remedy the breach, the Commission can then bring proceedings before the Court of Justice. It recommends a lump sum penalty and/or a periodic penalty payment.

The Court determines if the Member State is in default of its obligations and then imposes a fine. The fine imposed by the Court of Justice is determined by the Court itself; it does not have to follow the recommendation of the Commission. In July 1996, the Commission issued a Memorandum on fines and in January 1997, it published the Multiplier Notice on how it will calculate fines. The fines will be calculated according to:

1. the seriousness of the breach, which takes into account:

a. the importance of the Union law that has been breached

b. the effect of the breach on general and particular interests

2. the duration of the breach

3. the need to ensure that the fine has a deterrent effect.

The rate for fines is set at a flat rate per day which is multiplied to take into account the seriousness of the breach, the duration of the breach, and to ensure deterrent effect, based on the Member State’s ability to pay (GDP) and its voting power in a QMV as set out in Protocol No 36 on Transitional Provisions (until November 2014) or Article 238 TFEU. See: Case C-304/02 Commission v France [2005] ECR I-6263.

For the first time, the Court imposed both a periodic penalty payment and a lump sum fine under Article 228 EC (now Article 260 TFEU) for the serious and persistent failure of France to comply with Community Law. France had failed to take the necessary

Go to your study pack and read paragraphs 80-82 of the extract from Case C-304/02 Commission of the European Communities v French Republic.


measures to comply with the judgment of the Court in Case C-64/88 Commission v France [1991] ECR I-2727 brought under Article 226 EC, requiring it to prevent undersized fish being offered for sale and for ‘maintaining a lax attitude as regards taking action in respect of infringements’.

France was ordered to pay a lump sum fine of �20,000,000 and a penalty payment of �57,761,250 for each additional six month period during which it failed to comply. The Commission had only requested a periodic penalty and not a lump sum penalty.

Whereas the Commission and the Czech, Hungarian and Finnish governments in their interventions supported the view that the Court may, where appropriate, depart from the Commission’s suggestions and impose a lump sum on a Member State where this had not been suggested by the Commission, 12 other Member States in their interventions opposed this on procedural and substantive grounds. The Court held that:

it should be remembered that the Commission’s suggestions cannot bind the Court and are only a useful point of reference… In exercising its discretion, it is for the Court to set the penalty payment so that it is appropriate to the circumstances and proportionate both to the breach that has been established and to the ability to pay of the Member State concerned.

A TFEU amendment to Article 260 adds a paragraph which states that, even where the Commission brings a case to the Court for the first time under Article 258 for failure to notify transposition of a directive, it may specify a lump sum penalty payment. The eventual penalty payment which the Court may impose may not exceed the amount specified by the Commission.

State liability

Note also that, in certain conditions, an individual who suffers harm as a result of the failure of a Member State to fulfil its Treaty obligations can now bring an action for damages against that Member State. See Joined Cases C-6/90 and C-9/90 Francovich and Bonifaci v Italy [1991] ECR I-5357. See Chapter 6.

SummaryThe Article 258 TFEU action gives power to the Commission to take action against a Member State which appears to be in breach of its EU law obligations. The aim of the procedure is to arrive at a solution by negotiation and many possible breaches are resolved in this way. The procedure is divided into two stages, an administrative stage followed by a judicial stage. The administrative stage culminates in the reasoned opinion, which sets a time limit for compliance. If this final stage of negotiation fails to secure a resolution to the Commission’s satisfaction, the Article 258 TFEU action proceeds to the judicial stage. Although the Commission has the power to bring a Member State before the Court of Justice under Article 258 TFEU, the effectiveness of the procedure was limited by the lack of effective penalties. The Court may make a ‘Declaration’ that the Member State is in breach of its obligations under the TFEU. The impact of this has been strengthened by the addition of the Article 260 TFEU action, added to the Union legal order by amendment of the EC Treaty by the Maastricht TEU and by the addition of a further paragraph by the TFEU. Remember that this is a separate action, initiated again by the Commission against a Member State which has failed to comply with an Article 258 TFEU Declaration of the Court of Justice.

If negotiation fails to bring a resolution to the failure to comply with the Article 258 TFEU Declaration, the Member State is again brought before the Court under Article 260 TFEU. The Commission can recommend a financial penalty but the Court decides at what level to set the fine. It has unlimited power to fine the Member State, both by lump sum penalties and periodic fines. Only after a first time action may the amount not exceed the amount recommended by the Commission.

The defences which the Member States rely on the judicial stage of 258 TFEU are rarely accepted by the Court of Justice.


Activity 8.4 a. Explain the ways that an individual might seek to take action where a Member

State was in breach of its EU law obligations.

b. Read Article 4(3) TEU. Why do you think it is called the obligation of ‘sincere cooperation’?

c. What is the most common reason for Article 258 TFEU (ex Article 226 EC) actions?

d. Do you think Article 258 TFEU is an effective mechanism for ensuring the uniformity and effectiveness of EU law?

e. What are the advantages and disadvantages of the enforcement action under Articles 258 and 260 TFEU ?

Examination questionsArticles 258, 259 and 260 TFEU are often part of an examination question on direct actions, which would include those under Article 263 and 265 TFEU as well.


Reflect and review







Ready to move on


Need to study again

I can state which are the direct actions before the Court of Justice of the European Union.

I can give an account of the principles governing the use of Article 258 TFEU.

I can, in regard to Article 258 TFEU, outline the procedures that the Commission follows when taking action under this Article.

I can explain that the Article 258 TFEU action is part of the Commission’s role as ‘Guardian of the Treaties’ and explain the role of the Court of Justice in an Article 258 TFEU action.

I can give an account of the most important cases where defences have been raised by the Member States.

I can state the tests for interim relief under Article 279 TFEU.

I can evaluate the advantages and disadvantages of an Article 258 TFEU action.

I can explain why the second part of Article 260 TFEU was added to the EC Treaty by the Maastricht TEU.

I can explain why the final paragraph of Article 260 TFEU was added by the Lisbon Treaty.

I can give an account of the Article 260 TFEU action with reference to the factors which are taken into account by the Court of Justice when setting fines.


Must revise

Revision done

8.1 Direct actions

8.2 Article 258 TFEU enforcement action

8.3 Defences

8.4 Enforcement: Article 260 TFEU


Notes

9 Judicial review and the action for damages against Union institutions

Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140

9.1 Judicial review Article 263 TFEU . . . . . . . . . . . . . . . . . . . . . 141

9.2 Who can attack (who has locus standi or standing)? . . . . . . . . . . . 143

9.3 Direct concern . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153

9.4 Other elements of an Article 263 TFEU action. . . . . . . . . . . . . . . 154

9.5 Action for failure to act, Article 265 TFEU (ex Article 232 EC) . . . . . . . 154

9.6 Indirect challenge to the legality of Union measures, Article 277 TFEU (ex Article 241 EC) . . . . . . . . . . . . . . . . . . . . 155

9.7 Action for damages . . . . . . . . . . . . . . . . . . . . . . . . . . . 155



Introduction

In this chapter, we will analyse the action for judicial review of EU legislation under Article 263 TFEU (ex Article 230 EC) in detail. We shall then consider, more briefly, the action for failure to act under Article 265 TFEU (ex Article 232 EC) and the action for damages against Union institutions and their servants under Articles 268 and 340 TFEU (ex Articles 235 and 288 EC).

The most striking feature of the action for judicial review under Article 263 TFEU is the Court’s very restrictive interpretation of the test for standing for non-privileged applicants unless the individual is seeking to challenge a decision directly addressed to them. Non-privileged applicants are natural or legal persons. These rules were subject to criticism (a) in an Opinion of Advocate General Jacobs and (b) in a judgment of the CFI (now the General Court) on the grounds that there was a breach of the principle of effective judicial protection. As we shall see some of this criticism has been taken into account in the new version of Article 263 TFEU. We shall consider these criticisms at the end of the chapter.


give an account of the principles governing the use of Article 263 TFEU

outline the procedural requirements for bringing an Article 263 TFEU judicial review action including: time limits, requirement for ‘grounds’, requirement for ‘standing’ and the need for a ‘reviewable act’

explain what is meant by a ‘reviewable act’

state who or what is characterised as a privileged, semi-privileged and non-privileged applicant under Article 263 TFEU

explain the difference in the requirements for standing for a privileged, semi-privileged and non-privileged applicant under Article 263 TFEU

give an account of how the Parliament’s status has changed under Article 263 TFEU referring to the relevant case law

give a brief account of the Plaumann case, which established the test for individual concern, and state whether it still has relevance

explain how the Court of Justice has interpreted ‘direct concern’ with reference to case law

explain the exception to the general rules for a non-privileged applicant to have standing in regard to complainants in competition and anti-dumping cases

give an account of the cases where Advocate General Jacobs and the General Court have criticised the Court of Justice’s interpretation of the rules of standing for non-privileged applicants and describe the Court of Justice’s response

state what changes the Lisbon Treaty has made in Article 263 TFEU which are aimed at widening standing for non-privileged applicants

state the grounds for judicial review under Article 263 TFEU

apply these principles to a problem question on Article 263 TFEU

explain the indirect challenge: Article 277 TFEU (ex Article 241 EC)

explain the purpose of Article 265 TFEU and state the rules on standing for an action under Article 265 TFEU

state the test for liability for damages for discretionary legislative and non-legislative acts by Union institutions under Article 340 TFEU (ex Article 288 EC).

EU Law 9 Judicial review and the action for damages against Union institutions page 141

9.1 Judicial review Article 263 TFEU

Essential reading Horspool and Humphreys, Chapter 8: ‘Judicial review of Union action’,

sections 8.34–8.81, pp.262–285.

Craig and de Búrca, Chapter 12: ‘Review of legality’.

Article 263 TFEU.

Useful further reading Arnull, A. ‘Private applicants and the action for annulment under Article 173 of

the EC Treaty [now 263 TFEU] ‘[1995] 32 CMLRev 7.

Rasmussen, H. ‘Why is Article 173 interpreted against private plaintiffs?’ [1980] ELRev 112.

An important point to notice when considering this area, is that there is an alternative route whereby the individual can challenge the legality of EU legislation. This is through the preliminary ruling procedure under Article 267 TFEU. EU law is often administered by national authorities. Individuals can seek judicial review of the actions of the national authorities in their national courts under national rules on standing. Then, where the legality of the contested national measure depends on the legality of EU ‘parent’ legislation, a reference can be made to the Court of Justice under Article 267 TFEU for a ruling on the ‘validity’ of the EU legislation.

Annulment is the process by which the Court will declare that an Act has no legal effects and therefore no longer exists. We will consider the following questions in sequence:

1. What is the meaning of ‘acts’ in Article 263 TFEU?

2. Who can attack?

3. Within what time limit?

4. On what grounds?

5. What effect does annulment have?

Questions 1, 2 and 3 regard the admissibility of an action. Questions 4 and 5 concern substance.

Note that the General Court has jurisdiction to hear cases brought under Articles 263, 265, 268 and 340 TFEU except where cases are reserved to the Court of Justice in the Statute of the Court of Justice of the European Union.

Article 51 of the Statute currently states that direct actions brought by a Union institution, the Member States or the European Central Bank (ECB) must be heard before the Court of Justice.

9.1.1 Content of Article 263 TFEUArticle 230 EC, which has now been amended, reads as follows (the words which have been amended are in bold):

Any natural or legal person may, under the same conditions, institute proceedings against a decision addressed to that person or against a decision which, although in the form of a regulation or a decision addressed to another person, is of direct and individual concern to the former.

Article 263(4) TFEU reads as follows (amendments in bold):

Any natural or legal person may, under the conditions laid down in the first and second paragraphs, institute proceedings against an act addressed to that person or which is of direct and individual concern to them and against a regulatory act which is of direct concern to them and does not entail implementing measures.


In Article 263(4) TFEU, the word ‘decision’ has been replaced by the word ‘act’, thus widening the field of instruments, although it still has to have legal effect; the words ‘against a decision which, although in the form of a Regulation or a Decision addressed to another person’ have been replaced by the simpler formula ‘or which is of direct and individual concern to them’. On the whole there have been few problems with the requirement in the first part: an act addressed to a person. It was under the second part, where the individual had to show under Article 230 EC that an act called a Regulation was in fact a Decision or a ‘bundle of Decisions’ of direct and individual concern to them, where problems have arisen. Although the word ‘decision’ has been replaced by the wider term ‘Act’ the requirement of direct and individual concern remains for acts not addressed to the applicant.

The new part 2 of the fourth paragraph of Article 263 TFEU refers to a regulatory act which does not entail implementing measures (see below at 9.1.2). Moreover, the individual only has to show direct concern and no longer individual concern. Much of the case law decided under Article 230 EC will still apply but other cases have been overtaken by the new wording.

Finally, Article 263 TFEU has added a paragraph providing that acts setting up bodies, offices and agencies of the Union may lay down specific conditions and arrangements concerning actions brought by individuals (natural or legal persons) against acts of such bodies, offices or agencies of the European Union which are intended to produce legal effects in relation to them.

9.1.2 What is the meaning of ‘acts’ in Article 263 TFEU?The category of reviewable acts includes all acts that have legal effects. It is not limited to the acts listed in Article 288 TFEU. See: Case 22/70 Commission v Council (ERTA) [1971] ECR 263: 276–278. In the ERTA case (C-22/70) the Court of Justice held that the meaning of ‘acts’ was not restricted to the secondary legislation of the Union under Article 288 TFEU, that is, Regulations, Directives and Decisions (Recommendations and Opinions are excluded because they are not legally binding), but could include any act which had legal effects.

In the ERTA (European Road Transport Agreement) case the Member States acting together but not acting as the Council, had adopted a resolution which laid down what negotiating procedure would be used at the conference drawing up the European Road Transport Agreement.

This was intended to be binding on the Community institutions and the Member States but it was not in a recognised legal form, and no reasons were given as required under Article 253 EC (now Article 296 TFEU) for legal acts of the Community. It could not therefore be a lawful Regulation, Directive or Decision. The Commission thought that the matter fell not within the competence of the Member States but within the competence of the Community and therefore sought to annul it. The question which was raised was: Was the Commission’s action for annulment admissible? (i.e. was the resolution an ‘act’ for the purposes of Article 230 EC (now Article 263 TFEU)?) The Court held that:

the resolution was reviewable as it had legal effects

it was held to be a sui generis (i.e. of its own type) legal act

because it was not a Regulation, a Directive or a Decision it did not have to have reasons.

In Case 60/81 IBM [1981] ECR 2639: 2651–2652 the Court held that ‘the statement of objections’ issued by the Commission laying out the objections to an agreement which was being investigated for infringement of EC competition law, did not have legal effects and therefore could not be subject to judicial review.

See also Cases 8-11/66 Re Noordwijks Cement Accoord [1967] ECR 75: 91 and Joined Cases T-377/00, T-379/00, T-380/00, T-260/01 and T-272/01, Philip Morris International, Inc. and others v Commission [2003] ECR II-1. The decision by the Commission to bring legal


proceedings in a national court (in the particular case, the US district court) was not ‘an act’ which could be challenged under Article 230 EC (now Article 263 TFEU)as it did not have legal effects.

What is a ‘regulatory act’ in the Lisbon version of Article 263? This is a new term which has been brought into the Lisbon Treaty. It will be up to the Court to decide on its exact meaning and how much influence this will have on individual standing as defined in the Plaumann test (see below at 9.2.5). It could mean that all EU regulations would qualify as regulatory acts, thus repealing much of the Plaumann criteria for acts not requiring implementing measures and following Case T-177/01 Jégo-Quéré et Cie SA v Commission [2002] ECR II-2365 (see 9.2.5) Or it could have the much narrower meaning that only non-legislative acts are included (i.e. those not adopted under the legislative procedure of Article 289 TFEU). This latter interpretation would mean that the Plaumann test would be preserved for any challenge to legislative acts.

9.2 Who can attack (who has locus standi or standing)?

There are three classes of applicant under Article 263 TFEU: privileged, semi-privileged and non-privileged.

9.2.1 Privileged applicantsUnder Article 263 TFEU Member States, the Council and the Commission have always been privileged applicants. That is, they are accepted to have a sufficient legal interest to give them standing (locus standi) for such an action and thus they have automatic locus standi.

Since the ToN, the Parliament also has the status of privileged applicant.

9.2.2 The status of the European ParliamentThe Court has, in a series of cases, greatly enhanced the status of the European Parliament in the Union legal order. It held that the European Parliament has the right to intervene in cases before the Court: Case 138/79 Roquette Frères v Council [1980] ECR 3333 and Case 139/79 Maizena v Council [1980] ECR 3393.

Under Article 173 in the original Treaty of Rome (now Article 263 TFEU), the EP was not given status either to bring an action for judicial review or to have its acts judicially reviewed. This situation reflected its position as an institution whose greatest power in the legislative process was simply to be consulted (and not even that in many areas of the Treaty).

The Court held, in an important constitutional judgment in which it made reference to the rule of law and its own duty to ensure that the law is observed, that acts of the EP which have legal effects vis-à-vis third parties were subject to judicial review under Article 230 EC (now Article 263 TFEU). See: Case 294/83 Les Verts v European Parliament [1986] ECR 1339.

The Parliament had passed an act which divided Community funds for fighting the 1984 European Parliament elections among the parties contesting the election. The manner in which the Parliament allocated the funds resulted in the bulk of the money going to those parties which already had seats within the European Parliament – that is, those parties whose members were voting on the apportionment of the money. The French ecology party, ‘Les Verts’, which was not yet represented in the European Parliament, wanted to bring an action for judicial review against this act of the Parliament.

The Court referred to the Community as one based on the rule of law and held that acts of the Parliament which had legal effects vis-à-vis third parties could be judicially reviewed under Article 263 TFEU. The Court stated that:

an interpretation of Article 173 (now 263 TFEU) which excluded measures adopted by the Parliament from those which could be contested would lead to a result contrary both to the spirit of the Treaty… and to its system.


Note that the Treaty of Lisbon has now added the European Council and bodies, offices or agencies of the Union, whose acts ‘intended to produce legal effects vis-à-vis third parties’ to the list of bodies whose acts are reviewable.

The question then arose of whether the Parliament itself could bring actions for judicial review against acts of the other institutions. At this time, the Parliament was not mentioned as an institution which could bring such an action in the Treaty under Article 263 TFEU.

In the Comitology case (Case 302/87 European Parliament v Council (Comitology) [1988] ECR 5615), the Court of Justice refused to allow the EP to bring an action for review, saying that it was possible for the Commission to bring an action on its behalf if necessary.

However, it reversed its position in a case two years later, and did give the Parliament locus standi to bring a case in order to protect its own prerogatives. See: Case 70/88 European Parliament v Council (Chernobyl) [1990] ECR I-2091.

In this case, there was no other institution which could bring an action on the Parliament’s behalf, so if it did not have standing it would not have a remedy. The Court therefore granted the Parliament standing ‘to protect its own prerogatives’.

The case concerned a Council Regulation adopted after the Chernobyl disaster. This laid down maximum permitted levels of radioactive contamination in foodstuffs. It was adopted under Article 31 of Euratom which only required consultation of the Parliament. The Parliament claimed it should have been based on Article 95 of the EC Treaty which, at that time, required the cooperation legislative procedure, which gave the Parliament greater input. (See the section on legal base in Chapter 3.)

These judgments were then incorporated into the EC Treaty by the Maastricht TEU. This gave the Parliament what is called semi-privileged status.

In the Treaty of Nice Article 230 EC (now Article 263 TFEU) was amended again to give the Parliament the status of a privileged applicant. The Parliament has actively used its power to bring actions, challenging the legal base of legislation. See, for example: Case C-295/90 European Parliament v Council [1992] ECR I-4193 and Case C-181/91 and C-248/91 European Parliament v Council and Commission [1993] ECR I-3685 (this failed, because the measure challenged was not a Community act).

9.2.3 Semi-privileged applicantsSemi-privileged applicants have locus standi to bring actions for the purpose of protecting their prerogatives. The institutions that have this status under Article 263 TFEU at the present time are the Court of Auditors, the European Central Bank and the Committee of the Regions

Activity 9.1a. Why did the Court of Justice state that in order to uphold ‘the Rule of Law’ the

Partie Ecologiste could challenge the ‘act’ of the Parliament at issue in Les Verts?

b. ‘… the Court has adopted a generous and dynamic interpretation of the Treaty, or even a position contrary to the text, to ensure that the evolution in the powers of the Community institutions does not undermine the rule of law and the institutional balance.’ (Opinion in Case C-50/00 P Unión de Pequeños Agricultores v Council.)

Explain what Advocate General Jacobs was referring to in his statement in the above Opinion.

c. Why did the Parliament have no status under Article 263 TFEU (Article 177 EEC) either to bring actions for judicial review or to have its acts reviewed under the original Treaty of Rome in 1957?

d. It is often said that the Court has ‘championed’ the cause of the Parliament in the Union legal order. Do you agree?


e. List in chronological order the events which have changed the status of the Parliament under Article 263 TFEU

f. If one of the tasks of Parliament is to ‘scrutinise’ the acts of the other institutions, why do you think it is important that it should have privileged status under Article 263 TFEU?

g. Evaluate the result in the ERTA case.

9.2.4 Non-privileged applicantsUnder Article 263 TFEU non-privileged applicants (i.e. natural and legal persons) may bring review proceedings where the challenged act is:

an act addressed to the applicant

a regulatory act addressed to another person.

In the first situation, the applicant has automatic locus standi. The decision is addressed to the individual or company (typically in Competition proceedings) and therefore is no problem: they will automatically have standing.

In the second situation, the applicant must show that the contested measure is of direct concern to him.

The difficulties that occurred with the original Article 230 (now Article 263 TFEU) were twofold. First the term ‘decision’ ‘in the form of a regulation or a decision addressed to another person’, and second, which ‘is of direct and individual concern to the former’. The word decision has been replaced by the wider term ‘act’ in the first limb of 263(4) and by the word ‘regulatory act’ in the second. The requirement of direct and individual concern remains for ‘acts’ not addressed to a person, but the requirement of individual concern has been dropped for a regulatory act, only leaving direct concern. However, as the meaning of the term ‘regulatory act’ is not clear (see above at 9.1.2) and as the meaning of ‘direct concern’ may be interpreted differently by the Court than it has done in the past, a short description of some of the most important cases which may well be applied or referred to in future judgments follows. The Court has interpreted the wording of the original Treaty Article 230 here very narrowly:

the applicant had to show that the decision is of ‘direct and individual concern’ to him/her

both individual concern and direct concern had to be established before the applicant could have standing to bring an action.

Individual concern

We will consider the two situations where changes have occurred together:

a. where the decision is a decision addressed to another person

b. where the decision is in the form of a Regulation.

9.2.5 Where the decision is a decision addressed to another personThe leading case on individual concern is Case 25/62 Plaumann [1962] ECR 95.

Note that the decision addressed to another person is typically a decision addressed to a Member State which the individual applicant is seeking to annul. In this case, the German government asked the Commission for permission to suspend collection of duties on clementines imported from third countries (countries outside the Union). The Commission refused. This decision was addressed to the German government but clearly affected Plaumann, who was one of about 30 importers of clementines into Germany. Plaumann tried to challenge the Commission decision under Article 230 EC (now Article 263 TFEU). He therefore had to establish individual concern. He claimed individual concern as an importer of clementines.


The Court of Justice refused standing, saying that the decision was not of individual concern to Plaumann.

Persons other than those to whom a decision is addressed may only claim to be individually concerned if that decision affects them by reason of certain attributes which are peculiar to them or by reason of circumstances in which they are differentiated from all other persons and by virtue of these factors distinguishes them individually just as in the case of the person addressed.

That is, they must be ‘singled out’ in the same way as the initial addressee (in this case, Germany). Plaumann, as an importer of clementines, could be joined at any time by any other importer. He was not part of a ‘closed group’ but part of an ‘open’ group. In order to get standing it was necessary for the applicant to show that they were part of a closed circle of persons who were known at the time of the adoption of a decision. A closed group is one where the members are fixed at the time of the decision and probably defined with reference to a completed set of past events. The Court did not address the question of direct concern as standing had already been refused on the basis of lack of individual concern. It would probably not have been that difficult for Plaumann to establish direct concern.

For a case where the Court did find the applicants had standing, see Case 11/82 Piraiki–Patraiki [1985] ECR 207: 242–246. Here there were two groups of applicants and one group was held to have standing. Greek cotton undertakings challenged a Commission decision which had authorised the French government to introduce a quota on imports of yarn (cotton) from Greece between November 1981 and January 1982. The Greek applicants tried to distinguish themselves from Plaumann by arguing that their cotton manufacturing businesses had a complex infrastructure that could not be set up in a short time, therefore they fulfilled the Plaumann test. The Court of Justice held that they were not individually concerned.

Theirs was a commercial activity. They manufactured cotton yarn and could do so by any undertaking and at any time. The mere fact that the applicants exported goods to France was not sufficient to establish that they were individually concerned by the contested decision. However, those cotton manufacturers which had already entered contracts for sale into France to take effect during that period were given standing. They were a closed group – a group consisting of Greek cotton undertakings which had entered contracts for sale of yarn which would take effect between November 1981 and January 1982.

It seems, therefore, that a measure is of individual concern to an applicant only if the class of people whom it may affect is closed on the date of its adoption and if the applicant belongs to that class. The class is closed if the number and identity of its members is in one way or another unalterably fixed and therefore ascertainable at the time when the measure is taken.

The Toepfer cases

Another case where the applicants had standing – they were held to be a closed group – is: Cases 106 and 107/63 Toepfer [1965] ECR 405: 411–412. The applicants were grain dealers who applied for import licences from the German authorities on 1 October 1963, when the levy on such licences was zero. The German authorities realised that because of a change in market conditions these grain dealers would make large profits. So they rejected their applications until the levy was increased, and told them that their applications were rejected. The Commission was then asked to confirm this decision. The Commission raised the levy from 2 October and on 3 October confirmed the ban on the issue of licences from 1–4 October by a Decision. The grain dealers tried to have this Decision annulled.

So their identity was ascertainable as those who had applied for licences on 1 October and was ascertainable before the contested Decision was made. Therefore they were ‘differentiated’ – part of a closed group – and had standing.


Bock

Other cases include Case 62/70 Bock [1971] ECR 897: 908. Bock applied to the German authorities for permission to import Chinese mushrooms. The German government has a policy of not permitting the import of Chinese mushrooms but they needed authorisation from the Commission to refuse. The German authorities informed Bock that they would refuse permission as soon as they were authorised to do so by the Commission. The Commission addressed a decision to the German government authorising it to refuse applications for the import of Chinese mushrooms, including applications which had already been made. Bock sought standing for an action to annul that part of the Commission decision which authorised refusal of permission to import to existing applications. He was held to be individually concerned as his application had already been made.

Spijker Kwasten BV

Case 231/82 Spijker Kwasten BV v Commission [1983] ECR 259: Spijker was the only importer of Chinese brushes into Holland and had made an application to import such brushes to the Dutch government. Apparently in response to this request, the Dutch government had asked the Commission to issue a decision to ban the import of brushes for a six-month period. Spijker was the only company in Holland that could be affected by this decision yet it was held not to be individually concerned.

UNICME

Case 123/77 UNICME [1978] ECR 845: The ECJ specifically stated in this case that ‘the possibility of determining more or less precisely the number or even the identity of the persons to whom the measure applies by no means implies that it must be regarded as being of individual concern to them’.

Activity 9.2a. Read the account of the Plaumann case. Do you think that Plaumann was affected

by the Commission Decision?

b. Could you list the clementine importers into Germany at the time of the decision?

c. Why did the Court hold that Plaumann was not individually concerned?

d. What do you think the reason is for the Court’s attitude towards individual concern for non-privileged applicants?

e. How did the general class of Greek yarn manufacturers in Piraiki–Patraiki try to distinguish themselves from the clementine importers in Plaumann? Did they succeed? Who did succeed and why?

f. Compare this group to those who were given standing in Toepfer.

9.2.6 Criticism of the restrictive test for individual concernAs stated above the restrictive interpretation of the meaning of individual concern, as interpreted in the case law of the Court, was criticised as being at odds with the requirement for effective judicial protection for Community law rights, a principle established and upheld by the Union courts. Changes were at last made in the Lisbon Treaty. As described above, it will depend much on the interpretation of the new content of Article 263(4) how much of the case law still applies.

Recent cases on locus standi for non-privileged applicants under Article 263 TFEU

The changes in Article 263(4) TFEU attempt to deal with criticism of the limited standing rules as described below.

Advocate General Jacobs’ opinion in Case 50/00 UPA v Council [2002] ECR I-6677 proposed a new test for individual concern:


An applicant is individually concerned by a measure where, by reason of his particular circumstances, the measure has, or is liable to have, a substantially adverse effect on his interests.

UPA is a trade association representing and acting in the interests of small Spanish agricultural businesses. It sought annulment of a Regulation which reformed the common organisation of the olive oil market on a number of grounds. Among other changes, the Regulation discontinued both consumption aid and a specific allocation of aid to small producers.

The UPA put forward as one of its arguments to establish its individual concern that ‘there is a risk that it will not receive effective judicial protection’. The CFI dismissed UPA’s application for judicial review as manifestly inadmissible, as UPA was not individually concerned by the measure according to the case law on individual concern.

The present case concerned the appeal of UPA to the ECJ to annul the order of the CFI. One of its arguments was that the contested order, declaring its action inadmissible, violated UPA’s fundamental right to effective judicial protection which, it claimed, was a recognised principle of Community law.

In his opinion, Advocate General Jacobs confirmed that the principle of effective judicial protection is part of Union law. That principle is grounded:

… in the constitutional traditions common to the Member States and in Articles 6 and 13 of the ECHR. Moreover, the Charter of fundamental rights of the EU, whilst itself not legally binding, proclaims a generally recognised principle in stating in Article 47 that everyone ‘whose rights and freedoms guaranteed by the law of the Union are violated has the right to an effective remedy before a tribunal.

Advocate General Jacobs concluded that the restrictive case law on individual concern is ‘incompatible with the principle of effective judicial protection’.

He then proposed a new test for individual concern under Article 230 EC (now Article 263 TFEU):

In my opinion, it should therefore be accepted that a person is to be regarded as individually concerned by a Community measure where, by reason of his particular circumstances, the measure has, or is liable to have, a substantial adverse effect on his interests. [paragraph 60].

This would:

‘considerably improve judicial protection’

have the advantage of providing clarity to case law which has been criticised for its complexity and lack of coherence

reduce Article 234 EC (now Article 267 TFEU) references

have the advantage of shifting the emphasis of judicial review from question of admissibility to questions of substance

remove the anomaly that the Court of Justice has taken an expansive view of some aspects of Article 230 EC (now Article 263 TFEU) – such as the meaning of ‘acts’ (see Case 22/70 ERTA) and the standing of the European Parliament while taking a very restrictive approach to the meaning of ‘individual concern’.

Before the Court of Justice ruled in the UPA case the General Court itself proposed a new test in another case.

The test put forward by the CFI (now General Court)

The CFI (see 9.4.1) suggested a new test in: Case T-177/01 Jégo-Quéré et Cie SA v Commission [2002] ECR 11-2365.

The case concerned a challenge to a Regulation setting minimum mesh sizes for fishing nets used in certain fishing grounds in order to reduce catches of juvenile hake (so as to protect supplies of hake). The net sizes applied irrespective of the type of fish which the fishing vessels fishing in the areas were aiming to catch. The applicant was a French fishing company operating in the relevant areas which fished


for whiting and the Regulation was likely to have a significantly adverse effect on its business. The company claimed that the Regulation was in breach of the principles of proportionality, equality and the requirement to state reasons.

The Commission lodged an objection of inadmissibility to their application for judicial review of the Regulation.

The CFI stated that the applicants were directly concerned by the Regulation. Under the established case law on Article 230 EC (now Article 263 TFEU), however, the applicants could not be considered to be individually concerned by the Regulation, which was of general application, according to ‘the criteria hitherto established by the Community case law.’ The General Court then referred to the importance of access to the courts as ‘one of the essential elements of a Community based on the rule of law… guaranteed in the legal order based on the EC Treaty’, and reaffirmed the importance of effective judicial protection of rights in the Community legal order. This right was based on Articles 6 and 13 of the ECHR and Article 47 of the Charter of Fundamental Rights. In this case, the General Court pointed out that the applicants would not be able to challenge the validity of the Regulation by any other means than Article 230 EC (now Article 263 TFEU). The legislation at issue was a Regulation so there were no national implementing measures to be challenged which could have led to the possibility of an Article 234 EC (now Article 267 TFEU) reference where the validity of the Regulation could be tested.

The applicants would therefore be denied effective access to the courts and the possibility of an effective judicial remedy. The only possibility would be for the applicants to deliberately flout the law and raise the invalidity of the Regulation as their defence when they were prosecuted. But this was hardly an appropriate remedy.

In the light of this the General Court suggested a new test for individual concern under Article 230 EC (now Article 263 TFEU) where there was no alternative access to a remedy available to the applicant:

In the light of the foregoing, and in order to ensure effective protection for individuals, a natural or legal person is to be regarded as individually concerned by a Community measure of general application that concerns him directly if the measure in question affects his legal position, in a manner which is both definite and immediate, by restricting his rights or by imposing obligations on him. The number and position of other persons who are likewise affected by the measure, or who may be so, are of no relevance in that regard. [paragraph 51].

The General Court then dismissed the Commission’s objection of inadmissibility and stated that the proceedings be continued in relation to the substance.

9.2.7 The Court of Justice’s responseIn its judgment in Case 50/00 UPA v Council [2002] ECR I-6677 (see above at 9.2.6) the Court of Justice rejected the idea of changing the test for individual concern and stated that any such change must be effected by Treaty amendment by the Member States.

In its judgment in Case 263/02 Commission v Jégo-Quéré [2004] ECR I-3425, the ECJ confirmed its rejection of the test advocated by the CFI. It said of the test put forward by the CFI (see above):

Such an interpretation has the effect of removing all meaning from the requirement of individual concern set out in the fourth paragraph of Article 230 EC. It follows…that the Court of First Instance erred in law.

At the same time, the Court of Justice did appear to accept that in some national legal systems a remedy might not be available where the contested measure was a directly applicable and directly effective Regulation.

The Court stated that it was possible for the applicant to seek from the competent authorities a measure under the Regulation which he might contest before the national court, thus allowing a challenge to the validity of the Regulation through an Article 234 EC (now Article 267) reference.


As we have seen in Chapter 5 above, the validity of EU legislation can be challenged by way of an Article 267 TFEU reference to the Court. Most EU legislation is implemented at national level by some form of executive or legislative act of the Member State. When this is so, the individual can seek judicial review of the legality of this implementing act which enables an Article 234 EC (now Article 263 TFEU) reference questioning the validity of the EU legislation to be made to the Court of Justice.

The problem in Jégo-Quéré was that because the measure in question was an EC Regulation that was directly applicable, there were no national implementing acts to be challenged. The Court of Justice appeared to be suggesting that an applicant could, under these circumstances, seek some act clarifying the meaning of the EU Regulation for national law which would then constitute a national ‘decision’ or executive ‘act’ subject to challenge in judicial review proceedings in the national court. This would then allow an Article 234 EC (now Article 267 TFEU) reference to be made. It is a complicated and artificial solution.

Activity 9.3a. Explain why we have a judgment of both the General Court and the Court of

Justice in the Jégo-Quéré case.

b. Why would the applicants in Jégo-Quéré have no proper remedy if they were denied standing under Article 263 TFEU?

c. There is a way in which it would be possible to manufacture an Article 267 TFEU reference to the Court of Justice. Why did the General Court reject this possibility?

d. What principles of law did Advocate General Jacobs and the General Court allege were breached by case law on individual concern?

e. With what did Advocate General Jacobs contrast the Court of Justice’s restrictive case law on standing?

f. Read the extract from the Court of Justice’s response in UPA quoted above. What is the Court saying, in effect?

g. How do the changes in Article 263(4) TFEU affect the cases described above?

9.2.8 Decisions in the form of Regulations (now ‘Regulatory Act)Article 263(4) of the Lisbon TFEU has amended Article 230(4) by replacing the term ‘a decision which, although in the form of a Regulation or a Decision addressed to another person…’ with ‘a Regulatory Act’. There are different views of what a ‘Regulatory Act’ actually constitutes and this will probably not be clear until case law of the Court of Justice clarifies it.

The requirement of ‘individual concern’ no longer applies to a Regulatory Act, only ‘direct concern’ (see 9.3). The case law may apply in part and the main cases will have to be considered in future case law of the Court of Justice. See the brief analysis of the most important cases below.

Generally speaking, individuals could not challenge Regulations because their legal effects apply in a general and abstract manner. In order to successfully establish standing, the applicant claimed that although the challenged measure was in the form of a Regulation, it was in fact a disguised Decision of direct and individual concern to him or her. Non-privileged applicants could only bring actions to annul Regulations if they were, in fact, decisions and they were of direct and individual concern to them.

The ECJ has formulated two tests for whether such a measure is of individual concern to the applicant.

Test 1: The general application/abstract terminology test.

Test 2: The closed category test.

It seems that sometimes the Court applied the abstract terminology test and was not concerned with whether a closed category was involved.


Test 1: The general application/abstract terminology test

Whether the measure was a true Regulation was tested by whether it was phrased in general terms and applies to ‘categories of persons viewed in a general and abstract manner’.

If it does, then it could not be a disguised Decision and cannot be of individual concern to an applicant (with one exception – see below, Codorníu).

The Court of Justice held that this was a true Regulation because it applied to an ‘objectively determined situation’ and applied to categories of persons ‘described in a generalised and abstract manner’.

The fact that it was possible to identify the persons affected by the measure did not prevent it from being a true Regulation rather than a Decision. As it was a true Regulation, the applicants did not have standing to challenge it.

See also: Case 6/68 Zuckerfabrik–Watenstedt [1968] ECR 409: 415.

When this test was ‘passed’, the applicant still has to show that he or she was part of a closed group (Plaumann). The latter still applies in respect of the word ‘act’ in Article 263, direct and individual concern would still have to be shown.

Test 2: The closed category test

Where the Regulation applied to a closed category, the Court of Justice would sometimes apply this test and hold that the measure was a disguised Decision of individual concern to some applicants. The Court has adopted this ‘closed category approach’ in cases which deal with a completed set of past events where the ‘Regulation’ related to a fixed, closed set of traders and was therefore a ‘disguised Decision’. A Decision is characterised by the fact that the category of those to whom it is addressed is limited: Cases 41-44/70 International Fruit Co. [1971] ECR 411: 422.

This case concerned the import of apples from non-Member States. Import licences were required and importers would apply for the licences to their Member State. The Member States would notify the Commission of the number of applications for import licences that it had received in the previous week. The Commission would then decide on the issue of licences on the basis of this information. The challenge was to a Regulation which implemented this scheme every week.

The Court held that the applicant was individually concerned; the number of those applications affected by this Regulation was fixed and known when the Regulation was adopted.

The Regulation applied to a closed category of persons: the fruit importers who had applied for import licences the week before. It was characterised as a bundle of Decisions.

The Codorníu exception

An exception to the general rule regarding challenges to Regulation was established in Codorníu. Here, the applicant was given standing although the Court of Justice stated that the legislation challenged was a true Regulation. So a measure was held to be a true Regulation and yet to be of individual concern. The judgment turns on the particular facts of Case C-309/89 Codorníu [1994] ECR I-1853, in which the Court expressly acknowledged that a Regulation can be one of general application and yet could still be of individual and direct concern.

The contested Regulation said that the word ‘Crémant’ should be used exclusively for wines from France or Luxembourg. The applicant made sparkling wines in Spain. The trade mark contained the name Crémant. Other Spanish makers also used this term. The Council claimed that it was a Regulation within the Calpak test and could not be challenged even if was possible to identify those affected.

The Court of Justice agreed with the general and abstract terminology test and that it was the correct test. It said that this was a true Regulation in substance as well as form


under this test: it was of a legislative nature and applied to traders in general. But this did not stop it from being of individual concern to some of them. The applicant was individually concerned, because of the use of the word Crémant in his trade mark.

So it was a true Regulation by the abstract terminology test yet could still be of individual concern.

This appeared to be a significant relaxing of the rules on locus standi, heralding the amendment in Article 263(4) TFEU, but later cases have returned to a cautious and restrictive approach. In Case 209/94P Buralex v Council [1996] ECR I-615 the Court of Justice applied the ‘abstract terminology’ test to deny standing despite the fact that the identities of the companies (seeking to challenge a Regulation on the shipping of waste) could be determined. In Case T-472/93 Campo Ebro Industrial SA v Commission [1995] ECR II-421, [1996] 1 CMLR 1038, where the only iso-glucose producer in Spain was seeking to challenge a Regulation which laid down sugar prices in Spain, the General Court refused them standing. It held that they were only ‘affected in their objective capacity as iso-glucose producers in the same way as any other trader in the sugar sector who actually or potentially is in an identical position’ (paragraph 33).

It seems clear that the judgment in Codorníu was determined by its particular facts.

However, there is another exception where the applicant was part of a closed group which had previously been awarded a quota and was specifically mentioned by name in an annex to the Regulation. The company was held to be individually concerned, Case 138/99 Roquette v Council [1980] ECR 3333.

Interest groups

Greenpeace and other applicants specifically argued for a liberalisation of the rules on standing, but this was rejected by the CFI (now General Court) which restated the Plaumann test.

It was held that interest groups do not have locus standi where the individuals that they represent are not individually and directly concerned. See: Case T-585/93 Stichting Greenpeace Council (Greenpeace International) v Commission [1995] ECR II-2205.

The applicants sought the annulment of a Commission decision granting financial assistance from the European Regional Development Fund for the construction of two power stations in the Canary Isles in an environmentally sensitive area.

The applicants were individual fishermen, farmers and residents concerned with the environmental impact and the impact on tourism and also environmental groups.

They specifically advocated the use of a wider, more liberal test for standing.

The CFI applied the Plaumann test and stated that the existence of harm suffered or to be suffered (by the applicants) cannot grant locus standi since such harm may affect, generally and in the abstract, a large number of persons who cannot be determined in advance in a way which distinguishes them individually as in the same way as an addressee of a Decision. For individual concern they would have to show that they were affected by the measure in a way that differentiated them from all other persons. The applicants were not affected by the Decision other than in the same way as any other local resident, fisherman, farmer or tourist who was or might in the future be in the same situation.

Making complaints to the Commission does not give standing.

Greenpeace claimed to represent the general interest in the matter of environmental protection and to represent the interests of the persons living in the Canary Islands. The General Court held that an association formed for the protection of a group of persons who themselves are not individually and directly concerned does not have standing.

The Court of Justice confirmed the CFI ruling: Case 321/95 Stichting Greenpeace v Commission [1998] ECR I-1651.


9.3 Direct concern

Direct concern means that there should be no exercise of discretion between the original Act (a Decision under Article 230 EC, now Article 263 TFEU) and its application to the applicant. This means therefore that there should be no implementing measure necessary. This seems to be confirmed in the addition to the fourth paragraph of Article 263(4) TFEU of ‘a regulatory act... which does not entail implementing measures’.

On direct concern, see Case 69/69 Alcan [1970] ECR 385, which is now considered to be a very tough application of the test for direct concern. The Belgian government lobbied the Commission to increase the allocation of low tariff aluminium allowed into Belgium. The Commission refused to increase the quota and this decision was challenged by the applicant, which was an importer of aluminium.

The Court of Justice held that the decision was not of direct concern because even if the Commission had decided that the allocation could be increased the decision would not have required Belgium to increase the quota and, said the Court, it might have decided not to do so. However, given that the Belgian government had lobbied for the increase it seems very unlikely that it would have failed then to increase the quota if it was permitted to do so.

The Court of Justice took a more lenient, and arguably a more realistic approach, in Case 11/82 Piraiki–Patraiki [1985] ECR 207. Here, as mentioned above, Greek cotton undertakings challenged a Commission decision authorising the French government to introduce a quota on imports of yarn from Greece between November 1981 and January 1982.

Was this decision of direct concern to the applicants?

Although the French government had discretion as to whether to introduce the system of quotas, the Court held that this was entirely theoretical because the French had applied for stricter quotas than had been authorised. The French government would clearly impose the quotas if authorised to do so. Therefore, there was no discretion to be exercised on the part of the French government and the decision of the Commission was of direct concern to the applicants.

In Case 62/70 Bock v Commission [1971] ECR 897 Bock was held to be directly concerned because the German authorities had informed him that they would refuse his application as soon as they received a decision from the Commission permitting them to do so.

9.3.1 Special rules apply for non-privileged applicants in particular areasThe Court of Justice did not apply the strict test for direct and individual concern in certain areas.

Competition cases: The complainant in a competition case always has standing: Case 26/76 Metro [1977] ECR 1875.

Anti-dumping: Case 264/82 Timex Corporation v Council and Commission [1985] ECR 849: the original complainant in an anti-dumping case who wishes to challenge the Commission’s decision will be given standing to do so.

Case 358/89 Extramet Industrie SA v Council [1991] ECR I-2501. The importer of the product against which anti-dumping measures have been taken may be given standing.

State aids: Case 169/84 COFAZ v Commission [1986] ECR 391. Complainants are not automatically given standing, as under the Competition rules (see Metro, above), but the Court of Justice has taken a liberal approach to standing in these cases.


9.4 Other elements of an Article 263 TFEU action

Within what time limit?

The action must be brought within two months (Article 263(5) TFEU).

On what grounds?

For grounds of review see Article 263(2) TFEU.

Two grounds which are commonly used are an ‘infringement of an essential procedural requirement’ and ‘infringement of the Treaty or of any rule of law relating to its application.’

‘Infringement of an essential procedural requirement’ includes failure to comply with the duty to give reasons, used in, for example, Case T-105/95 World Wildlife Fund v Commission [1997] ECR II-313 concerning the failure to give reasons for a refusal of access to Commission documents. Also, recall Case 137/79 Roquette Frères v Council [1980] ECR 3333 where the failure to await the response of the Parliament when it had been consulted, as required under the Consultation procedure resulted in the annulment of a Council Regulation.

‘Infringement of the Treaty or of any rule of law relating to its application’ includes actions for judicial review on the grounds of breach of the general principles, see, for example: Case 4/73 Nold v Commission [1974] ECR 491, discussed in Chapter 5.

What is the effect of annulment?

If an action is well founded, the Court of Justice will declare the Act concerned to be void. Such a declaration of annulment will have erga omnes (general) and ex tunc (retroactive) effects.

Article 267 TFEU (ex Article 234 EC) as an alternative means of challenging the validity of legislation

It is possible for an individual to wait until the legislation that is considered to be invalid is implemented at a national level by national rules. The validity of the national rules may be challenged in the national court and, where the basis of that claim is the invalidity of the parent Union legislation, an Article 267 TFEU reference may be made to the Court of Justice seeking a ruling on the validity of the act. This circumvents the requirement for locus standi and the time limit under Article 263 TFEU.

Note that where an applicant would have had standing to seek judicial review in order to challenge the validity of a Union measure under Article 263 TFEU but failed to do so within the time limit, they will not be allowed to use the Article 267 TFEU procedure to seek a ruling on its validity. See Case C-188/92 TWD Textilwerke Deggendorf GmbH v Bundesrepublik Deutschland [1994] ECR I-833.

9.5 Action for failure to act, Article 265 TFEU (ex Article 232 EC)

Where the Treaty imposes a duty to act on the Council and the Commission, and they fail to act, then an action may be based on a violation of the Treaty through inactivity. Article 265 TFEU is designed to complement the remedy afforded by Article 263 TFEU (action for annulment), with which it has a number of features in common. According to the Court of Justice, the two articles merely prescribe one and the same ‘method of recourse’ (the ‘unity principle’). It is not necessary to characterise the proceedings which are brought as one or the other. See Case 15/70 Chevalley [1970] ECR 975.

Under Article 265 TFEU, the applicant calls upon the institution to act. The institution then has two months to act or ‘to define its position’. Once the two months have elapsed, the applicant has two months within which to bring an action for failure to act.

Case 13/83 Parliament v Council [1985] ECR 1513: the failure to act must be an infringement of the Treaty. In this case the Parliament took action against the Council for failure to act:


to introduce a common transport policy

to introduce measures ensuring freedom of movement of services to secure transport services as required under Articles 91, 56, 57, and 58 TFEU (ex Articles 71, 49, 50 and 51 EC respectively).

The first action failed because it was not sufficiently precise but the second succeeded.

The individual applicant must establish direct and individual concern.

9.6 Indirect challenge to the legality of Union measures, Article 277 TFEU (ex Article 241 EC)

The plea of illegality (Article 277 TFEU)

The plea of illegality is a type of indirect challenge to Union Regulations only. It does not constitute a separate cause of action, and it can only be raised in the course of proceedings already initiated in the Court of Justice on some other grounds. In: Joined Cases 31 and 33/62 Wohrmann v Commission [1962] ECR 501 the Court of Justice made clear that Article 277 TFEU cannot be invoked in the course of proceedings in the national court.

Its scope includes acts of the institutions that, although not in the form of Regulations, nonetheless produce similar, general effects. See: Case 92/78 Simmenthal v Commission [1979] ECR 777.

9.7 Action for damages

Essential reading Horspool and Humphreys, Chapter 8(II): ‘Judicial Review of Union Action’,

sections 8.82–8.97, pp.285–291.

Craig and de Búrca, Chapter 2: ‘Damages Actions and Money Claims’, pp.547–571.

An action for damages against the Union may involve contractual or non-contractual liability under Articles 268 and 340 TFEU (ex Articles 235 and 288 EC respectively). On contractual liability, see Article 340 TFEU.

9.7.1 Damages against Union institutions: non-contractual liabilityUnion liability in tort – described as ‘non-contractual liability’ – is governed by Articles 268 and 340 TFEU. The Union may be liable for:

the wrongful acts of one of its institutions or

the wrongful acts of its servants.

The wrongful act must be committed in the performance of Union functions. Where this is so, the responsible institution may be sued.

There is no requirement for standing.

The time limit to bring a case is five years, running from the occurrence of the event giving rise to liability (Article 46 Protocol on Statute of the Court of Justice).

There is no definition of fault in the Treaty. Case law of the Court of Justice has defined ‘wrongful act’ as requiring:

a wrongful act or omission by one of the institutions or its servants

actual damage suffered by the claimant

a causal link between the two.

Most of this section will concentrate on the Court’s case law on what constitutes a ‘wrongful act’ where the Union institution exercises a discretion. We will then consider damage and causality.


9.7.2 A wrongful act or omission by one of the institutions

Liability for legislative and non-legislative acts where the institution has a discretion

Originally, the Court of Justice held that failure to quash an act under Article 263 TFEU was fatal to bringing an action for damages: Case 25/62 Plaumann & Co v Commission [1963] ECR 95.

These applicants, as you will remember, failed to establish locus standi under Article 263 TFEU. The Court held that plaintiffs could not succeed in an action for damages under Article 340 TFEU (ex Article 288 EC) unless they had previously succeeded in quashing the relevant legislation under Article 263 TFEU or had established an unlawful omission to act under Article 265 TFEU. This rule placed a formidable hurdle in the way of claimants for damages because we have seen the difficulties for the individual applicant in establishing standing under Article 263 TFEU.

However, the Court reversed this case law in a case concerning Article 265 TFEU: Case 4/69 Lütticke [1971] ECR 325. This was confirmed in Case 5/71 Aktien-Zuckerfabrik Schöppenstedt [1971] ECR 975.

This clearly was important because of the shortness of time limit and narrowness of locus standi under Article 263 TFEU. It is now established that the action for damages under Article 340 TFEU is a separate and independent remedy, not tied in to Article 263 TFEU or Article 265 TFEU.

The Schöppenstedt formula

Mere illegality of an act or an unlawful failure to act are not sufficient to establish an action for damages.

The test for liability for legislative and non-legislative acts, where the institution concerned is exercising a discretion, was laid down in Case 5/71 Aktien-Zuckerfabrik Schöppenstedt [1971] ECR 975. The formula established is that liability extends to such acts provided that there is a ‘sufficiently flagrant violation of a superior rule of law for the protection of the individual’ (‘Schöppenstedt formula’).

The Schöppenstedt formula sets out three requirements:

1. There must be breach of a superior rule of law: this means a Treaty Article, a regulation or one of the general principles. See Case 74/74 CNTA v Commission [1975] ECR 533. Recent case law has omitted the word ‘superior’ merely referring to a ‘rule of law’; this includes the general principles, see: Case T-210/00 Establissements Biret v Council [2002] ECR 11-47.

2. The breach must be sufficiently serious (replacing ‘sufficiently flagrant’ in earlier case law). See: Joined Cases 83, 94/76, 4, 15, 40/77 Bayerische HNL v Council and Commission [1978] ECR 1209.

3. The rule of law infringed must be one for protection of the individual: Cases 5, 7, 13–24/66 Kampffmeyer [1967] ECR 245.

The action in damages in Bayerische HNL stemmed from the same facts as Case 114/76 Bela-Mühle [1977] ECR 1211. In that case, the requirement on the animal feed producers to buy the more expensive skimmed milk powder instead of soya had led to the annulment of the Regulation on the grounds of breach of the principles of non-discrimination and proportionality.

However, the claimants’ subsequent action for damages failed because the breach was held not to be sufficiently serious. The test for whether this breach was sufficiently serious for damages under Article 288 EC (now Article 340 TFEU) turned on whether ‘the institution concerned has manifestly and gravely disregarded the limits on its discretion’. The Court of Justice decided that this was not so in this case by considering the ‘effects’ of the breach.


For a similar case where the claimants did succeed in establishing a ‘sufficiently serious breach’, see: Joined Cases 64 & 113/76 167 & 239/78 27, 28 & 45/79 Dumortier Freres SA v Council.

In Case C-104/89 and 37/90 Mulder v Council and Commission [1992] ECR I-3061, dairy farmers had been offered a premium by the Community for agreeing not to market milk for five years, between 1979 and 1988. This was to enable the Community to reduce surpluses. A large number of farmers took up this offer. Later, the Council introduced a quota setting the amount of milk that an undertaking could produce without incurring a levy. This quota was based on production in a ‘reference’ year which was one of the years (1983) when the farmers had ceased production under the milk reduction scheme. The farmers were now in the position where they no longer received the premium and could not start production of milk without incurring a levy, as they had no reference quota. The legality of this was challenged by Mulder in Case 120/86 Mulder v Minister van Landbouw en Visserij [1988] ECR 2321.

The Regulation setting the quota was annulled as being in breach of Mulder’s legitimate expectations. The Council then introduced a new quota of 60 per cent of milk production in the year before the application. This was challenged as being too low and the Court of Justice also annulled this Regulation.

In the subsequent action for damages under Article 340 TFEU, the farmers received damages (including loss of profit) for the effects of the first Regulation which had denied the farmers any quota at all. However, they failed to receive damages for the losses under the second Regulation, imposing the 60 per cent allocation. The Court held that the Council’s decision to allocate the 60 per cent quota was a choice of economic policy, taking into account the public interest. The breach was not sufficiently serious. This case also established that, contrary to earlier case law, a large number of claimants were not, in itself, fatal to a successful claim under Article 340 TFEU.

An important case has now confirmed that the test for a sufficiently serious breach under Article 288 EC (now Article 340 TFEU) is tied into the test for state liability established in Case 46 and 48/93 Brasserie du Pêcheur SV v Germany ECR I-1029 C-352/98 and R v Secretary of State for Transport ex parte Factortame [1996] All ER (EC) 301.

The Court confirmed in Case C-352/98 Laboratoires Pharmaceutiques Bergaderm SA and Goupil v Commission [2000] ECR I-5291 that:

The protection of the rights which individuals derive from Community law cannot vary depending on whether a national authority or a Community institution is responsible for the damage.

The same factors will apply. For a sufficiently serious breach to have occurred, the institution must have ‘manifestly and gravely disregarded the limits on its discretion’. To determine this, the Court will take into account those indicators set out in Brasserie du Pêcheur:

the clarity of the rule breached

the measure of discretion left to the relevant authorities

whether the error of law was excusable or not

whether the breach was intentional or voluntary (see Chapter 6).

As with state liability, there is no need for fault if there has been a sufficiently serious breach.

This connection between the two actions in damages simplifies and clarifies the approach under Article 340 TFEU to what is ‘a wrongful act’.

Liability for acts where there is no discretion: the test then will be illegality, causation, damage.


9.7.3 A wrongful act or omission by one of the institution’s servantsFor ‘wrongful acts’ of Community servants see Case 9/69 Sayag v Leduc [1969] ECR 325. Sayag was an engineer employed by Euratom. He was instructed to drive Leduc, a representative of a private firm to certain installations. There was an accident and Leduc was injured. He sued Sayag in the Belgian courts. The question of whether he was acting ‘in the performance of his duties’ and that therefore the action should have been against the Community, was raised. The Belgian court made a reference to the ECJ on this point. The Court held that ‘the Community is only liable for those acts of its servants which, by virtue of an internal and direct relationship, are the necessary extension of the tasks entrusted to the institutions’. Driving a representative to an installation was not a ‘necessary extension of the tasks entrusted to the institutions’ and any action for damages against the Community would not succeed.

This establishes a narrow test for liability on the Union institutions under Article 340 TFEU where it is the wrongful act of one of its ‘servants’.

Damages

The damage must be actual. See: Cases 5, 7, 13–24/66 Kampffmeyer [1967] ECR 245.

Causality

Cases 64 & 113/76 167 & 239/78 27, 28 & 45/79 Dumortier Freres SA v Council establishes that the chain of causation must not be broken by any action on the part of the claimant or a Member State. The causal link may be severed by contributory negligence on behalf of the applicant. See: Case C-308/87 Grifoni [1990] ECR I-1203 and Case 145/83 Adams [1985] ECR 3540.

Activity 9.4What is the test for a ‘wrongful act’ where a Union institution acts with discretion?

What factors are relevant in deciding whether there is a ‘sufficiently serious’ breach under Article 340 TFEU?


Sample examination questionsQuestion 1 ‘Direct enforcement of Union law before the Court of Justice may take place in different ways and by different actors.’

Explain this statement and discuss.

Question 2 ‘The preliminary reference system under Article 267 TFEU has proved a more effective legal route for an individual to make use of Union law than the direct access route.’

Discuss.

Advice on answering the questionsQuestion 1 This question should start with an introduction explaining that in the Union legal order there are direct actions before the Court of Justice, as well as the references which come to the Court of Justice from the national courts, and where the final outcome of the case is decided by the national court.

Then the different types of action directly enforcing Union law before the Court should be discussed, explaining that these are different actions brought by different actors.

Articles 258 and 260 TFEU should be described, stating the purpose (to ensure Member States comply with their Union law obligations) and procedure, that it is the Commission taking action against Member States which the Commission believe to be in breach of Union law. You should mention that the only result of a finding by the Court of Justice under Article 258 TFEU that the Member State is in breach is a ‘Declaration’ by the Court to that effect.


Explain that Article 228 EC was introduced by TEU (now Article 260 TFEU) in order to add a financial penalty to ensure Member States complied with Article 258 TFEU judgments (please remember that Article 260 TFEU is a separate action brought by the Commission when Member States have failed to comply with an Article 258 TFEU Declaration by the Court of Justice).

Article 263 TFEU should be discussed, explaining that institutions, Member States and individuals can all bring actions for judicial review and classifying them as privileged and non-privileged applicants.

Describe how privileged applicants have automatic standing but that individual applicants, unless they are challenging a decision addressed directly to them, must establish direct and individual concern to challenge a decision addressed to another or a decision in the form of a Regulation. A very good answer would record that the status of the European Parliament under Article 263 TFEU has changed from being non-privileged to fully privileged, a development driven by case law of the Court of Justice.

A brief account of the difficulties faced by the non-privileged applicants should be given, citing Plaumann and Calpak and perhaps Patraiki for individual concern at least and explaining briefly what direct concern means, again citing Patraiki (a useful case in this area!).

Article 265 TFEU should be mentioned, stating that again there are privileged and non-privileged applicants. The action for damages against Union institutions under Articles 268 TFEU and and 340 TFEU needs to be mentioned as well, explaining that it is the action for non-contractual damages which can be brought against Union institutions or their servants by individuals. This area is less highlighted in this course than Article 263 TFEU and requires less attention.

A conclusion should mention that, indeed, direct enforcement of EU law is possible by a number of different actors in a number of different types of action.

This question must have reasonable coverage of both Article 258 and Article 263 TFEU, the most important relevant provisions, with a mention of the other actions available.

Question 2 This question requires discussion of the following.

The fact that there are two routes for individuals seeking to challenge the validity of EU law: the direct action under Article 263 TFEU and the Article 267 TFEU reference from the national court where the Court of Justice has jurisdiction to rule on the validity, as well as the interpretation, of EU law.

The Article 263 TFEU route is problematic because of the short time limit.

The requirements for establishing standing for a non-privileged applicant unless the act is addressed to them should be explained.

In regard to the time limit, there is no time limit under Article 267 TFEU but the Court refuses to allow applicants who have standing and are aware of their right to challenge under Article 263 TFEU to circumvent the time limit by using Article 234 EC (TWD).

The requirements for standing for individual applicant should be discussed, using the material cited in Question 2 above.

The question should conclude that Article 267 TFEU is an easier and alternative route, but (and very good answers will cite Jégo-Quéré for this point) sometimes there are no national implementing measures for the EU legislative act. In such a case, there are no national measures which can trigger a judicial review action in the national court.

As above, the recent criticism of the rules on standing must be discussed.

Conclude that Article 267 TFEU is a more effective route for individuals as long as there is a national measure which can be challenged in the national court.


Reflect and review







Ready to move on


Need to study again

I can give an account of the principles governing the use of Article 263 TFEU.

I can outline the procedural requirements for bringing an Article 263 TFEU judicial review action including: time limits, requirement for ‘grounds’, requirement for ‘standing’ and the need for a ‘reviewable act’.

I can explain what is meant by a ‘reviewable act’.

I can state who or what is characterised as a privileged, semi-privileged and non-privileged applicant under Article 263 TFEU.

I can explain the difference in the requirements for standing for a privileged, semi-privileged and non-privileged applicant under Article 263 TFEU.

I can give an account of how the Parliament’s status has changed under Article 263 TFEU referring to the relevant case law.

I can give a brief account of the Plaumann case, which established the test for individual concern, and state whether it still has relevance.

I can explain how the Court of Justice has interpreted ‘direct concern’ with reference to case law.

I can explain the exception to the general rules for a non-privileged applicant to have standing in regard to complainants in competition and anti-dumping cases.

I can give an account of the cases where Advocate General Jacobs and the General Court have criticised the Court of Justice’s interpretation of the rules of standing for non-privileged applicants and describe the Court of Justice’s response.

I can state what changes the Lisbon Treaty has made in Article 263 TFEU which are aimed at widening standing for non-privileged applicants.

I can state the grounds for judicial review under Article 263 TFEU.


I can apply these principles to a problem question on Article 263 TFEU.

I can explain the indirect challenge: Article 277 TFEU (ex Article 241 EC).

I can explain the purpose of Article 265 TFEU and state the rules on standing for an action under Article 265 TFEU.

I can state the test for liability for damages for discretionary legislative and non-legislative acts by Union institutions under Article 340 TFEU.


Must revise

Revision done

9.1 Judicial review Article 263 TFEU

9.2 Who can attack (who has locus standi or standing)?

9.3 Direct concern

9.4 Other elements of an Article 263 TFEU action

9.5 Action for failure to act, Article 265 TFEU (ex Article 232EC)

9.6 Indirect challenge to the legality of Union measures, Article 277 TFEU (ex Article 241 EC)

9.7 Action for damages


Notes

10 Free movement of goods

Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164

10.1 The legal basis of the single market . . . . . . . . . . . . . . . . . . . 165

10.2 Tariff barriers to trade within the EU . . . . . . . . . . . . . . . . . . . 167

10.3 Article 110 TFEU (ex Article 90 EC) discriminatory taxation . . . . . . . . 170

10.4 Articles 34–36 TFEU (ex Articles 28–30 EC) quantitative restrictions . . . . 174

10.5 Harmonisation measures under Article 114 TFEU (ex Article 95 EC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189



Introduction

The free movement of goods between the Member States is one of the four fundamental freedoms established by the Treaty of Rome. The original 1957 Treaty spoke of creating ‘a common market’, but in the Single European Act of 1986, the term ‘internal market’ was substituted. This term is defined in what is now Article 26 TFEU (ex Article 14 EC), as ‘an area without internal frontiers’:

Article 26 TFEU (ex Article 14 EC): The Union shall adopt measures with the aim of establishing or ensuring the functioning of the internal market, in accordance with the relevant provisions of the Treaties...The internal market shall comprise an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured in accordance with the provisions of these Treaties.

The idea, then, is not simply that goods should be able to cross the borders between states without having to pay duties or face any other kind of obstacle, but those very borders should cease to exist as far as the movement of goods is concerned. There should be a single market, rather than a collection of national markets.

Essential reading Horspool and Humphreys, Chapter 9: ‘Free movements of goods (I): the abolition

of customs duties and internal taxation’; Chapter 10: ‘Free movements of goods (II): quantitative restrictions and measures having equivalent effect’.

Craig and de Búrca, Chapter 18: ‘Free movement of goods: duties, charges, and taxes’; Chapter 19: ‘Quantitative restrictions’.

Mortelmans, K. ‘The common market, the internal market and the single market, what’s in a market?’ (1998) 35 CMLRev 101.


explain clearly the main European Union rules laid down in the Treaty, secondary legislation and case law, which govern the free movement of goods in the EU

explain the position of goods entering the EU from non-Member States

distinguish between illegal charges and legal taxes on goods moving between Member States by applying the relevant legal tests

identify the circumstances in which it is legal for Member States to impose charges on goods in internal or external European Union trade

explain the difference between similar and competing products under Article 110 TFEU (ex Article 90 EC) and the legal consequences when such products are taxed differently

explain the extent to which Member States are allowed to use policy reasons to justify indirectly discriminatory tax regimes

identify national rules which breach Article 34 or 35 TFEU (ex Article 28 or 29 EC)

distinguish between discriminatory and ‘indistinctly applicable’ rules, and explain the differences in the way such rules are dealt with under EU law

explain the concept of derogation under Article 36 TFEU (ex Article 30 EC), the Cassis ‘mandatory requirements’ and the principle of proportionality

produce, and weigh the merits of, arguments in favour of, and against, the likelihood of derogation in any given circumstances in the light of a sound knowledge of the European Court’s approach

distinguish between a ‘product requirement’ and a ‘selling arrangement’

explain what type of ‘selling arrangement’ can be in breach of 34 TFEU (ex Article 28 EC) .

EU Law 10 Free movement of goods page 165

10.1 The legal basis of the single market

Essential reading Horspool and Humphreys, Chapter 9: ‘Free movement of goods (I): the abolition

of customs duties and internal taxation’, sections 9.1–9.23, pp.295–306.

Craig and de Búrca, Chapter 17: ‘The Single Market’, pp.604–614.

The single market is an economic policy pursued through legal measures. As with all European Union policies, the legal basis of the single market for goods must be sought in the European Treaties.

10.1.1 A ‘fundamental freedom’The authors of the original Treaty recognised that there were two main aspects to achieving the aim of an integrated European Community (as it was then called) market. First, the removal of existing barriers, be they in the form of customs duties, import quotas or other trade barriers. This aspect is sometimes referred to as ‘negative integration’ because integration of the market results from the removal or abolition of existing rules.

This is not enough to achieve a single market for goods, however. Take, for example, a light bulb manufactured in the UK. It may be perfectly possible to export this to Greece without payment of duty or other entry restrictions, but will it fit into a Greek light socket? If not, there is clearly not a single market for light bulbs in the EU. The second aspect of achieving a single market, therefore, involves a process called ‘harmonisation’ of national rules, technical standards, safety requirements and so on. This is sometimes referred to as ‘positive integration’ because it requires positive steps to introduce new European Union-wide rules and standards so that, provided a particular product complies with these, it can truly be sold and used anywhere in the EU (see Section 10.5).

Through its ‘purposive’ interpretation of the Treaty rules, the Court has played a major role in ‘freeing up’ the movement of goods in the EU.

When considering the free movement of goods it is important to distinguish clearly between monetary (or tariff) barriers (i.e. those that concern some form of financial charge) which fall under Articles 28–30 TFEU (ex Articles 23–25 EC) or may be discriminatory taxation under Article 110 TFEU (ex Article 90 EC) , and all other barriers to trade which do not involve payment of charges and which may be considered under Articles 34–36 TFEU (ex Articles 28–30 EC)

Article 35 TFEU (ex Article 29 EC) and the purely internal situation

It was always presumed that the free movement of goods provisions were only applicable where there was inter-state trade. However in Case C-293/02 Jersey Produce Marketing Organisation Ltd v States of Jersey [2005] ECR I-9543, the Court of Justice took a reference from the Royal Court of Jersey (Jersey is one of the Channel Islands and part of the United Kingdom), and held that there was a breach of Articles 28 and 35 TFEU (ex Articles 25 and 29 EC) in respect of legal requirements imposed on exporters of potatoes from the Channel Islands to the United Kingdom. Jersey potatoes are a special type of ‘new’ potato which are distinctive and command high prices.

Jersey producers were prohibited from exporting their potatoes to the United Kingdom market unless they had registered with a body such as the Jersey Potato Export Marketing Board and entered into a marketing agreement with them. Further, the rules prohibited all marketing organisations from exporting produce unless they had entered into restrictive agreements with the same body concerning which potato sellers they bought their produce from. There were penalties for non-compliance with these requirements. The Court of Justice held that these measures were a breach of Article 35 TFEU (ex Article 29 EC). Additionally, the requirement for all potato producers to pay a contribution to the Jersey Potato Export Marketing Board was a breach of Article 30 TFEU (ex Article 25 EC).

To give an illustration: where there is a national law requiring an inspection for goods crossing a border (e.g. on cowhides moving from Germany into Italy) and the importer is charged a fee for the inspection, the inspection itself is a barrier to trade falling under Articles 34–36 TFEU (formerly Articles 28–30 EC) while the charge for the inspection falls under Articles 28–30 TFEU (ex Articles 23–25 EC).


The Court of Justice brought this within the scope of free movement of goods by saying that the Jersey potatoes ‘might’ be re-exported from the United Kingdom. This decision has been strongly criticised. (See, for example, Oliver and Enchelmaier ‘Free Movement of Goods: Recent Developments in the Case law’, CMLRev 44 pp.649–704 2007.)

10.1.2 The Customs UnionThe creation of a Customs Union is provided for in Article 28 TFEU (ex Article 23 EC):

The Union shall comprise a customs 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 having equivalent effect, and the adoption of a common customs tariff in their relations with third countries.

Unlike a Free Trade Area (FTA), in which members are free to set their own independent tariffs and restrictions on goods entering their territory from non-member countries, the EU is a Customs Union, in which the Member States apply a Common Customs Tariff (CCT) in trade with non-members. They can no longer each set their own customs duties. The CCT has applied since 1968.

Quantitative restrictions

These are measures which restrict the quantity of a particular type of goods that can be imported or exported. The most extreme example of a quantitative restriction is an import or export ban. Less drastic restrictions include import/export quotas, or requirements to obtain import/export licences.

What are goods for the purposes of the free movement rules?

In Case 7/68 Commission v Italy (Art Treasures) [1968] ECR 423, the Italian government had argued that art treasures were not ordinary goods and that it should be able to impose an export duty to deter export of such things. The Court held that the free movement provisions apply to any product which can be valued in money and form the basis of a commercial transaction.

10.1.3 External competence: trade with non-Member StatesThe power to legislate on customs duties and quantitative restrictions in trade between the EU and non-Member States (‘third country goods’) is ‘an exclusive European Union competence’.† Member States have completely transferred their sovereignty to the European Union and only the European Union institutions are competent to adopt measures. The principles and procedures for the adoption of measures affecting external trade relations are laid down in:

Articles 31-32 TFEU (ex Articles 26–27 EC) in relation to the Common Customs Tariff

Articles 206-7 TFEU (ex Articles 131–134 EC) in relation to the Common Commercial Policy which deals with quantitative restrictions.

Goods in free circulation

Once third country goods have crossed over an external border, and entered the EU, they are allowed to circulate freely around the EU on the same basis as goods produced inside the EU. This is laid down in Article 28 (2) TFEU (ex Article 23(2) EC) :

Article 28(2) [the provisions on customs duties, charges and quantitative restrictions]... ’shall apply to products originating in Member States and to products coming from third countries which are in free circulation in Member States.’

† This is why, for example, in negotiations in the World Trade Organisation to set tariffs in international trade, it is the EC, not the individual Member States, which enters the agreement.


Self-assessment questions1. What are the economic advantages and/or disadvantages that flow from an

integrated European Union market for goods?

2. What is meant by the term ‘internal market’?

3. What is the difference between a ‘free trade area’ and a ‘customs union’?

4. What is the Common Customs Tariff (CCT)?

5. What is meant by ‘external competence’? Which body has this competence in relation to trade in goods?

6. What do you understand by the term ‘goods in free circulation’?

10.2 Tariff barriers to trade within the EU

For trade between Member States of the EU, the basic rule is laid down in Article 30 TFEU (ex Article 25 EC) (Pre-Amsterdam Article 12 EC):

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.

10.2.1 Direct effect It was held that Article 30 TFEU (Pre-Amsterdam Article 12 EC) could be relied on by individuals in the national courts in Case 26/62 Van Gend en Loos [1963] ECR 1. This was the first case in which the Court of Justice held that a Treaty article could have ‘direct effect’ (see Chapter 6).

10.2.2 Charges having equivalent effect Customs duties as such were successfully abolished early in the history of the European Community, as it was then called (July 1968). However, it was not originally clear what was covered by the concept of ‘a charge having equivalent effect’ (CEE). The Commission brought a number of cases against Member States in the 1960s and the Court of Justice took the opportunity to give a very wide meaning to this phrase.

One such case, 24/68 Commission v Italy (‘Statistical Levy’) [1969] ECR 193, [1971] CMLR 611, involved an Italian levy on imports and exports across its borders. The levy was a very small sum and it was used to pay for the gathering and publication of statistics on trade patterns.

The Court of Justice emphasised that it is the effect, not the purpose, of the levy that matters: extra fees and charges are likely to put imported goods at a disadvantage compared with domestically produced goods. It also dismissed the Italian government’s argument that the statistical data was a ‘service’ to traders which they should pay for. The Court of Justice ruled:

Any pecuniary charge, however small and whatever its designation and mode of application, which is imposed unilaterally on domestic or foreign goods by reason of the fact that they cross a frontier... constitutes a charge having equivalent effect…(Statistical Levy Case 24/68)

Even if the money is used for a ‘social’ aim, the prohibition, which is absolute, applies. See Joined Cases 2 and 3/69 Social Fond voor de Diamantarbeiders v Brackfield [1969] ECR 211.

The key part of this definition or test is whether the sum of money has become payable because goods have crossed a frontier within the EU.

If it can be shown that the sum is payable for some other reason – for example as payment for a specific service carried out for the trader, such as provision of storage facilities, then it follows that it is not payable because goods have crossed a frontier, and so does not fulfil the Court’s definition of an illegal charge.


The Court of Justice has held that the prohibition on ‘charges of equivalent effect’ also applies to goods imported directly from third countries: see Case 37, 38/73 Diamantarbeiders v Indiamex [1973] ECR 1609. This means that the CCT duty can be levied on such goods, but no other charges can be added by the Member States.

Exceptions

The EU Treaty does not contain any exceptions or defences to Article 30 TFEU (ex Article 25 EC), the prohibition is strict and absolute. However there are some situations that fall outside the prohibition because they do not fulfil the above test. These are:

proportionate payment for a service received

charge for inspection where the inspection is mandatory under European Union law

payment due under the importing state’s internal tax system (‘internal tax’).

Charges in all the above situations have been held to be lawful. We will now examine each of them in turn.

10.2.3 Payment for a serviceThere must be a specific benefit individually conferred on the importer/exporter. If it is simply a benefit in the ‘general interest of all exporters’, or a general benefit to the public at large, it will not qualify: Case 24/68 Commission v Italy (Statistical levy) [1969] ECR 193.

General benefits, for which it would be illegal to levy a charge, include inspections of goods on import or export. Such inspections are usually for public health reasons, or to ensure quality: see Case 63/74 W. Cadsky SpA v Instituto nazionale per il Commercio Estero [1975] ECR 281 and Case 87/75 Bresciani [1976] ECR 129 (hides).

A charge for a service will be lawful where the benefit paid for is a service actually rendered to the importer, probably at his request AND the cost charged for the service is based on the actual cost of providing it. See Case 132/82 Commission v Belgium [1983] ECR 1649 (public warehouses – storage charges).

Activity 10.1Consider whether the following charges breach Article 30 TFEU (ex Article 25 EC). Give reasons and support your conclusions with relevant authorities.

a. A fee for a ‘certificate of quality’ certifying a certain standard which has been verified by an inspection.

b. A charge for carrying out customs and excise formalities.

10.2.4 Charges for inspections mandatory under European Union lawAs we have seen, charging for inspections of imported goods is usually unlawful. The exception is that it is lawful for a Member State to charge a fee for an inspection where the inspection is required under a European Union Directive, rather than by national law, and the Directive does not specify who should pay for it. See: Case 46/76 Bauhuis v Netherlands [1977] ECR 5 and Case 18/87 Commission of the European Communities v Federal Republic of Germany.

10.2.5 Domestic taxes apply to imported goodsIf a charge applies equally and in the same way to both domestic and imported goods, it may be legal as an internal ‘tax’. There has been some harmonisation of indirect taxes such as VAT, and the setting of minimum excise duties on alcohol and tobacco but Member States are still largely free to decide their own level of taxes, for example, on tobacco, cars, petrol, alcohol etc. provided these ‘internal taxes’ are ‘origin-neutral’. As long as there is strict equivalence in the treatment of domestic and imported products, it is lawful to impose domestic taxes on imported goods.

Go to your study pack and read paragraphs 9–11 of the extract from Case 87/75 Conceria Daniele Bresciani v Amministrazione Italiana delle Finanze.

Go to your study pack and read paragraphs 6–15 of the extract from Case 18/87 Commission of the European Communities v Federal Republic of Germany.


Such taxes, however, fall under Article 110 TFEU (ex Article 90) and not under Article 30 TFEU. It should be noted that the two Articles are mutually exclusive. If a product is taxed when it crosses a border, such tax will be subject to Article 30 TFEU. See 10.3 below.

10.2.6 Taxing imports where there is no equivalent domestic productTobacco is not commercially grown in the UK. Does this mean that a tax on tobacco is unlawful because it will only apply, in practice, to imported tobacco?

In Case 193/85 Cooperativa Cofrutta Srl [1987] ECR 2085, hardly any bananas were grown in Italy, but the Court of Justice still held that the Italian ‘consumption tax’ on imported bananas was part of the internal tax system:

… even a charge which is borne by a product imported from another Member State, when there is no identical or similar domestic product, does not constitute [an illegal] charge but internal taxation within the meaning of Article 95 [Article 110 TFEU]... if it relates to a general system of internal dues applied systematically to categories of products in accordance with objective criteria irrespective of the origin of the products (paragraph 10).

Self-assessment questions1. Can financial charges imposed on goods crossing a border within the EU ever be

justified?

2. How did the Court of Justice define ‘goods’ for the purpose of the Treaty provisions on free movement in the ‘Italian Art’ case?

3. What is the legal test for deciding whether a financial charge is of ‘equivalent effect’ to a customs duty?

4. Is the purpose of the charge relevant?

5. How would you distinguish an illegal charge from a legal fee for service?

6. What is the test to decide whether a payment is part of the state’s internal taxation system?

Activity 10.2Write out an answer, advising the client in the following circumstances:

a. The UK levies a special duty on hi-fi equipment from Japan. UK-based Manosh does not import directly from Japan but gets Japanese products from a Danish supplier. Is the UK duty legal under European Union law? Is Manosh obliged to pay this duty?

b. Carlos has arranged for a consignment of German refrigerators to be stored at a Customs and Excise warehouse in the UK until he is ready to despatch them to retailers. He is being charged a daily storage charge, calculated according to the value of the goods. Does this charge breach Article 30 TFEU (ex Article 25 EC)?

c. Consider the legality of a levy on imported televisions of two per cent of the wholesale price where:

i. domestic manufacturers pay no such levy

ii. domestic manufacturers pay the same levy.

d. The EC Digital Equipment Directive requires the testing of samples to check compliance with safety standards. The Directive does not say who is to cover the cost of the tests. Kish imports digital cameras from Germany into the UK and has been charged £5.00 for the testing of a sample of the consignment.

Note the methodology used for tackling the questions in Activity 10.2 and follow this approach in answering problem questions to ensure a logical structure to your argument:1. Identify the legal issue(s) that arise from the facts.Then, taking each issue in turn:2. Cite the relevant law – Treaty Articles, Case law etc. – and be accurate in stating the rules and legal tests laid down.3. Apply those rules and tests to the facts given.4. Draw a conclusion, giving your reasons as to why the test is fulfilled/not fulfilled, or the rule in question breached/not breached.


SummaryWe have seen that all charges on goods moving between Member States are illegal irrespective of their purpose unless the charge falls into one of three categories:

a proportionate fee for a service provided at the trader’s request and for his/her individual benefit

a proportionate fee for an inspection which is obligatory under a European Union Directive

a tax due under the Member State’s internal tax system.

10.3 Article 110 TFEU (ex Article 90 EC) discriminatory taxation

Essential reading Horspool and Humphreys, Chapter 9: ‘Free movement of goods (I): the abolition

of customs duties and internal taxation’, sections 9.24–9.36, pp.306–316.

Craig and de Búrca, Chapter 18: ‘Free movement of goods: duties, charges and taxes’, pp.648–665.

10.3.1 The application of Article 110 TFEU (ex Article 90 EC) Article 110 TFEU (ex Article 90 EC) prohibits discriminatory taxation which favours domestic production over imports from other Member States. For example, charging a higher rate of tax on French wine than on English wine would amount to discriminatory taxation and be prohibited by Article 110 TFEU (ex Article 90 EC).

The first paragraph, Article 110(1) TFEU (ex Article 90(1) EC) prohibits any tax imposed on imported goods which is in excess of that imposed ‘directly or indirectly’ on ‘similar’ domestic products. The second paragraph, Article 110(2) TFEU (ex Article 90(2) EC), prohibits internal taxation which gives ‘indirect protection’ for domestic goods. The aim of the article is to achieve ‘fiscal neutrality’ between domestic and imported goods:

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.

Further, no Member State shall impose on the products of other Member States any internal taxation of such a nature as to afford indirect protection to other products.

Definition of an internal tax: see sections 10.2.5 and 10.2.6 above and Case 193/85 Cooperativa CoFrutta Srl [1987] ECR 2085.

Direct effect of Article 110 TFEU (ex Article 90 EC): see Case 57/65 Lutticke [1966] ECR 205.

Methods of collection: these can, in themselves, result in discrimination, as in Case 55/79 Commission v Ireland [1980] ECR 481, [1980] 1 CMLR 734 (periods of grace). Imported products had to pay the tax immediately, whereas domestic products had several weeks to pay – a ‘period of grace’. This was discriminatory: a breach of Article 110 TFEU (ex Article 90 EC).

10.3.2 Relationship between Article 110(1) TFEU (ex Article 90(1) EC) and 110(2) TFEU (ex Article 90(2) EC): similar or competing products?It can sometimes be difficult to decide whether products are ‘similar’. For example, is wine similar to beer? After much controversy and lengthy litigation, the Court of Justice ruled, in Case 170/78 Commission v UK (wine and beer) [1980] ECR 417, [1983] CMLR 2265 that they were not. Different raw materials were used, different production methods and the products had different characteristics.

If not ‘similar’ for the purposes of Article 110(1) TFEU (ex Article 90(1) EC), could wine and beer be regarded as ‘competing’, for the purposes of Article 110(2) TFEU (ex Article 90(2) EC)? The test the Court of Justice uses to decide whether products are competing

Go to your study pack and read paragraphs 8–12 and 26–28 of the extract from Case 170/78 Commission of the European Communities v United Kingdom of Great Britain and Northern Ireland.


is whether customers regard those products as ‘fulfilling the same consumer need’. At the time of this case, the British were not great wine drinkers and tax on wine was higher than on beer. Despite this, the Court said that consumer attitudes should not be frozen in time: with the greater availability of imported products as a direct result of the free movement of goods in the EC, customers could try new things – and should not be deterred by high taxes from doing so! So light wines at the cheaper end of the market were held to be ‘competing’ with beer.

In Case C-302/00 Commission v France (Tobacco) [2002] ECR I-2055, France was imposing a higher rate of tax on light tobacco cigarettes than on dark ones. The Court of Justice decided that light and dark tobacco products were similar, despite the fact that they tended to be consumed by different age groups, because they were made from the same basic raw material (although different types), had similar properties and fulfilled the same consumer need. The finding was reinforced by the fact that European Union legislation on excise duties treated both types of cigarettes as the same. France was required to equalise the tax.

10.3.3 Consequences of a breach of Article 110 TFEU (ex Article 90 EC)This depends on whether the breach is of Article 110(1) TFEU (ex Article 90(1) EC) or 110(2) TFEU (ex Article 90(2) EC). In the case of similar products under Article 110(1) TFEU (ex Article 90(1) EC), the remedy is that Member States are required to ensure strict equivalence in the tax, or if there is a sliding scale which is difficult to apply to imports, then the imports must be placed at the lowest point on the scale so there can be no possibility of them paying more tax than the domestic equivalent product. See: Case 127/75 Bobie Getränkevertrieb v Hauptzollamt Aachen-Nord [1976] ECR 1079.

If the products are not similar, but are competing, as in the UK wine and beer case above, it is not necessary that the rates of tax be identical. Rather, the Member State must ensure that the rates are such that there is no ‘protective effect’ for the competing domestic product.

In Case 356/85 Commission v Belgium [1987] ECR 3299, [1988] 3 CMLR 277 (beer and wine), the Commission’s action failed on this point. The products were competing, but the effect of the tax differential was so small at the point of sale that it was unlikely to have any impact on consumer choice and so would not ‘protect’ the domestic product (beer).

10.3.4 Third country goodsArticle 110 TFEU (ex Article 90 EC) applies to goods in free circulation (see Case 193/85 Cooperativa Cofrutta, above). However, generally, Article 110 TFEU (ex Article 90 EC) does not apply to third country goods directly imported into a Member State. Even where provisions on discriminatory taxation have been included in Free Trade or Association Agreements with the EU, the Court has given a more limited interpretation to them: see Case 104/81 Kupferberg [1982] ECR 3461 at 3665.

Where goods are imported from a third country with which the EU has no such agreement, Article 110 TFEU (ex Article 90 EC) does not apply: see Cases C-114/95 and C-115/95 Texaco v Danish Ports [1997] ECR I-4263.

10.3.5 ExportsAlthough Article 110 TFEU (ex Article 90 EC) does not mention exports, the Court of Justice has held that it could apply if goods to be sold on the domestic market had to pay less tax than those for export, as this might deter exports, contrary to the Treaty aim which is to encourage free movement of goods.

An example of this is Case C-234/99 Nygard [2002] ECR I-3657, concerning a levy on pigs, whether slaughtered for the domestic market or for live export, which was more advantageous in the case of those for sale on the domestic market. The Court of Justice held the levy breached Article 110 TFEU (ex Article 90 EC).


Direct discrimination or indirect discrimination?

If different tax rates apply depending on the country of origin of the goods, or on whether they are home-produced or imported, that is direct discrimination on the basis of origin and clearly breaches Article 110 TFEU (ex Article 90 EC).

In case C-90/94 Haahr Petroleum [1997] ECR l-4142, national rules required Danish ports to impose a 40 per cent surcharge on the basic charge paid for goods unloaded from ships. The surcharge was only on goods loaded on ships arriving from outside Denmark. This was a case of direct discrimination on the basis of origin.

In Cases C-290/05 [2006] Nádasdi and C-333/05 Németh [2006] ECR I-10115 the applicant had purchased a car in Germany and had applied, on return to Hungary, to register the vehicle in that Member State. A tax levied on the import of the car, which was determined on the technical and environmental aspects of the vehicle, was contested by both applicants. The Hungarian court referred the cases to the Court of Justice. As the tax was levied by virtue of the characteristics of the car, and not solely due to the fact that the vehicle had crossed a frontier, the measures should be considered under Article 110 TFEU (ex Article 90 EC). The Court examined the nature of registration of vehicles within Hungary and that of vehicles imported into the country. In the former category, registration charges were based on the value of the car, which would diminish with the age of the vehicle. By contrast, a car imported into Hungary of any age would attract a registration fee based on characteristics of the car and could cost substantially more to register. The fact that depreciation of the car was not taken into account caused the tax to be caught by Article 110 TFEU (ex Article 90 EC).

Article 110 TFEU (ex Article 90 EC) also covers indirect discrimination. This is where, on its wording, the tax appears to be neutral and makes no reference to the origin of the goods, but where the basis on which the tax is levied depends on a feature which, in practice, only occurs in imported products. This results in indirect tax protection for domestic products despite the apparently non-origin criteria of the tax. In cases of indirect discrimination, it is necessary to prove that there is a protective effect: see Case 112/84 Humblot [1985] ECR 1367 and contrast Case 132/88 Commission v Greece [1990] ECR I-1567 (progressively increasing tax for social policy reasons – legal, no discriminatory or protective effect).

Case C-383/01 DBI (Der Danske Bilimportorer) v Skatteministeriet [2003] ECR I-6065 concerned very high registration tax on new cars sold in Denmark which were ALL imported: there was no breach of Article 110 TFEU (ex Article 90 EC) because there were no Danish products to be protected.

Objective justification of indirect discrimination?

Direct discrimination can never be justified: see Case C-90/94 Haahr Petroleum v (Danish ports) [1997] ECR l-4142. There are, however, some cases where justification has been allowed by the Court of Justice in circumstances of indirect discrimination: 140/79 Chemial Farmaceutici v DAF [1981] ECR 1, [1981] 3 CMLR 350, (industrial policy justification); 200/85 Commission v Italy [1986] ECR 3953 and 196/85 Commission v France [1987] ECR 1597 (naturally sweet wines – regional policy to support poor regions of France which produce these wines).

Although in practice these taxes favoured domestic products, they avoided condemnation under Article 110 TFEU (ex Article 90 EC) because they were non-discriminatory in theory: for example, naturally sweet wines from another Member State could also have benefited from the lower tax rate.

Go to your study pack and read paragraphs 12–16 of the extract from Case 112/84 Michel Humblot v Directeur des Services Fiscaux.


Activities 10.3a. In what circumstances can a Member State tax a product imported from another

Member State if there is no domestic production of that product? (see 193/85 Cooperativa Co-Frutta [1987] ECR 2085)

b. How could the French government have amended its tax on cars over 16CV to make it compatible with Article 110 TFEU (ex Article 90 EC)? (see 112/84 Humblot [1985] ECR 1367)

No feedback provided as the answers can be found in the Case extracts referred to.

Activities 10.4Similar/competing products: read cases 170/78 Commission v UK (wine and beer) [1980] ECR 417, [1983] CMLR 2265, and 356/85 Commission v Belgium [1987] ECR 277, [1988] 3 CMLR 277.

In case 170/78:

a. What is the meaning of ‘similar’ products under Article 110 TFEU (ex Article 90 EC)? When is it permissible to tax similar products at a differential rate?

b. What had to be done to enable the protective effect to be removed?

c. What would the remedial steps be in the case of similar, rather than competing, products?

No feedback provided as the answers can be found in the Case extracts referred to.

Activities 10.5Italy has recently introduced an ‘environment tax’ of 10 per cent of the sale price, payable on all new cars with 2000cc engines or above. The tax is part of a national energy-saving policy designed to reduce fuel consumption by encouraging use of small cars. The Italian car industry does not make any models with 2000cc engines or above.

Julia is an importer of German cars, including many models over 2000cc. She is concerned that the new tax on such cars will lead to reduced sales. Advise Julia as to whether this measure may be challenged under EU law.

Activities 10.6As part of its strategy to combat alcoholism, the Swedish government has increased taxation on spirits over 30 per cent proof. Hardly any Swedish-made drinks are over 30 per cent proof. Spirits and fruit liqueurs with lower alcoholic content are taxed at a much lower rate.

Advise Angus, a Scotch Whisky manufacturer, as to whether the Swedish tax can be challenged under EU law.

SummaryArticle 30 TFEU (ex Article 25 EC) and Article 110 TFEU (ex Article 90 EC) can never both apply together, so it is important to distinguish first between charges (to which Article 30 TFEU (ex Article 25 EC) applies) and internal taxes. Internal taxes are lawful provided that they are ‘origin neutral’ (i.e. do not impose a higher tax burden on imported goods).

Products which are ‘similar’ must be taxed strictly equally. Taxes on products which are ‘competing’ need not be identical, but the differential must not be such that consumers will give preference to the domestic product (so that there is no ‘protective effect’).

Both direct and indirect discrimination are covered. Direct discrimination can never be justified. Indirect discrimination may be justified in pursuit of a legitimate policy objective.


10.4 Articles 34–36 TFEU (ex Articles 28–30 EC) quantitative restrictions

Essential reading Horspool and Humphreys, Chapter 10: ‘Free movement of goods (II): quantitative

restrictions and measures of equivalent effect’, sections 10.1–10.15, pp.317–324.

Craig and De Búrca, Chapter 19: ‘Free movement of goods: quantitative restrictions’.

10.4.1 Quantitative restrictions and measures of equivalent effectArticles 34–36TFEU (ex Articles 28–30 EC) are among the most important in the Treaty. Article 34 TFEU (ex Article 28 EC) prohibits quantitative restrictions (quotas, bans, import licences) on imports and all measures having equivalent effect (MEQRs). Article 35 TFEU (ex Article 29 EC) contains the same prohibition in relation to exports:

Article 34 TFEU (ex Article 28 EC): Quantitative restrictions on imports and all measures having equivalent effect shall be prohibited between Member States.

Article 35 TFEU (ex Article 29): Quantitative restrictions on exports, and all measures of equivalent effect, shall be prohibited between Member States.

Quantitative restrictions (QR) are ‘quotas’ or limits on the number of goods which can be imported from one country into another, so a hypothetical rule stating that only 100,000 watches can be imported from Russia into the United Kingdom each year would be a QR. Such quotas are prohibited between Member States by Article 34 TFEU (ex Article 28 EC). Such a rule, since it is aimed specifically at imports, is discriminatory. Notice that a total ban on imports can be regarded as a quota of zero.

The Court of Justice has defined quantitative restrictions as ‘measures which amount to a total or partial restraint of... imports, exports or goods in transit’ (see Case 2/73 Geddo v Ente Nazionale Risi [1973] 865).

An example of a quantitative restriction is the Spanish provision at issue in Case C-47/90 Établissements Delhaize Frères et Compagnie Le Lion SA v Promalvin SA and AGE Bodegas Unidas SA [1992] ECR I-3669.

Spanish law set quotas on the bulk export of its wine while placing no restrictions on domestic sales. When Delhaize from Belgium, ordered 3,000 hectolitres of the wine, the export was not permitted under the Spanish rules. The law was held to be a QR on exports and illegal under Article 35 TFEU (ex Article 29) EC.

The meaning of ‘Measures having equivalent effect to a quantitative restriction’ (MEQRs) is not given by the Treaty but the Commission attempted to fill this gap by adopting Directive 70/50. The main focus of the Directive (see Article 2) is on discriminatory measures. These are sometimes called ‘distinctly applicable measures’ as they only apply to imported goods; they ‘make importation more difficult or costly than the disposal of domestic production’.

In Article 3, the Directive says that Article 34 TFEU (ex Article 28 EC) also covers:

measures governing the marketing of products which deal, in particular, with shape, size, weight, composition, presentation, identification or putting up and which are equally applicable to domestic and imported products, where the restrictive effect… exceeds the effects intrinsic to trade rules. [emphasis added]

This is the kind of measure referred to as ‘indistinctly applicable’. The Commission, in Directive 70/50, appeared to accept that ‘indistinctly applicable measures’ will generally be acceptable unless they are ‘out of proportion to their purpose’ and ‘the same objective can be attained by other means which are less of a hindrance to trade’ – that is, they should be subject to a proportionality test.

The Directive is no longer in force but has been influential on the case law of the Court. See below, however, for how the Court has actually defined MEQRs.


Article 36 TFEU (ex Article 30 EC) permits derogation from Articles 34 TFEU (ex Article 28 EC) and 35 TFEU (ex Article 29 EC), allowing measures which are caught by those Articles to be justified, as long as the national measures taken are proportionate, that is, that they are not ‘arbitrary discrimination or a disguised restriction on trade’ (see below).

The requirement for a state measure

For Article 34 TFEU (ex Article 28 EC) to apply, there must be a state measure: see Case C-249/81 Commission v Ireland ‘Buy Irish’ [1982] ECR 4005, where the Irish Goods Council was found to have state funding and direct state involvement in the appointment of its Management Committee. The Court of Justice held that its activities were, therefore, subject to Article 34 TFEU (ex Article 28 EC). See also Case C-222/82 Apple & Pear Development Council v KJ Lewis Ltd [1983] ECR 4083.

However, it is clear from this case that Article 34 TFEU (ex Article 28 EC) only has vertical effect, against the actions of the State.

While normally the actions of individuals are not covered by Article 34 TFEU (ex Article 28 EC), in Case 265/95 Commission v France [1997] ECR I-6959, the Court of Justice held that inaction by the state in the face of organised and persistent disruption by French activists was a breach of Article 28 EC. The French had not done enough to prevent activists obstructing imports into France of cheaper fruit and vegetables from Spain and Portugal. The problem had gone on for 10 years without a single prosecution being brought.

10.4.2 Measures having equivalent effect to a quantitative restriction (MEQRs)The Court of Justice’s expansive interpretation of a MEQR has made Article 34 TFEU (ex Article 28 EC) a powerful instrument for attacking national rules which impede the free movement of goods.

Article 34 TFEU (ex Article 28 EC) is clearly intended to prohibit discriminatory measures against imports. However, the prohibition of discriminatory measures would not be sufficient to allow free movement of goods, as technical requirements for goods, imposed by the importing Member State, also have the effect of preventing imports. The case law under Article 34 TFEU (ex Article 28 EC), which is extensive, is primarily concerned to define the limits of Article 34 TFEU (ex Article 28 EC); to which measures does it apply? The Court of Justice has extended the reach of Article 34 TFEU (ex Article 28 EC) to catch measures which are not discriminatory in law (because they apply both to domestic products and to imported goods) but which do have a discriminatory effect in fact. These are called ‘indistinctly applicable’ measures, because they apply without discrimination to domestic products and imported goods.

Altough there are a large number of cases in this area, it is helpful to think of the structure as defined by four highly significant cases.

Case 8/74 Procureur du Roi v Dassonville [1974] ECR 837 which gives a very wide definition of an MEQR.

Cassis de Dijon case – Case 120/78 Rewe-Zentral AG v Bundesmonopolverwaltung für Branntwein (‘Cassis de Dijon’) [1979] ECR 649 which extended the reach of Article 34 TFEU (ex Article 28 EC) even further, to catch indistinctly applicable measures, while also creating a new set of exceptions for such rules. This case also introduced the principle of ‘mutual recognition’.

Joined Cases C-267 and C-268/91 Criminal Proceedings against Keck and Mithouard [1993] ECR I-6097. The effect of Cassis was to extend the reach of Article 34 TFEU (ex Article 28 EC) too far and the Court redefined the limits of the Article in Keck.

The post-Keck case law. Case 405/98 Konsumentombudsmannen (KO) v Gourmet International Products (GIP) [2001] ECR I-1795.

See further on the duty of Member States to ensure that movement of goods is not disrupted by protesters, Section 10.4.4 below.

Go to your study pack and read paragraphs 24–34 of the extract from Case C-265/95 Commission of the European Communities v French Republic.


Definition of an MEQR

Case 8/74 Procureur du Roi v Dassonville [1974] ECR 837. Dassonville was prosecuted in Belgium for selling Scotch whisky without a certificate of origin required by Belgian law. He had imported the whisky from France where such a certificate was not required. He argued that the Belgian rule prevented the free movement of whisky from France to Belgium. The Court of Justice agreed, and said that Article 34 TFEU (ex Article 28 EC) covers:

all trading rules enacted by Member States which are capable of hindering, actually or potentially, directly or indirectly, intra-Community trade.

This definition focuses on ‘hindrance’ rather than discrimination. Because the certificate was less easily obtainable for an indirect importer (than for a Belgian distributor buying direct from the manufacturer), the Belgian requirement was a MEQR in breach of Article 34 TFEU (ex Article 28 EC). The Court acknowledged that Member States might need to have reasonable measures to protect consumers, but these should not be more difficult for some importers than others to comply with.

Another important step was taken in Case 249/81 Commission v Ireland (Buy Irish) [1982] ECR 4005. The Irish Goods Council’s publicity campaign to persuade Irish consumers to buy Irish goods in preference to imported ones was held to be a MEQR. It had been argued that a ‘measure’ meant a legally binding measure, but the Court held that even non-binding measures could have the effect of hindering imports just as much as laws and rules. There was not even a need to prove that imports had fallen – under the Dassonville formula, a potential effect is enough.

These early rulings greatly extended the scope of Article 34 TFEU (ex Article 28 EC), making it into an extremely powerful tool for building the single market!

Self-assessment questions1. What is a ‘quantitative restriction’? Give two examples.

2. What is a ‘measure having equivalent effect to a quantitative restriction’? Give two examples.

3. In the Buy Irish case, why was it relevant that the members of the Management Committee of the Irish Goods Council were appointed by a government Minister? (Case 249/81 Commission v Ireland). Why was the measure considered by the Court of Justice to breach Article 34 TFEU (ex Article 28 EC)?

4. If a group of demonstrators tries to block the free movement of goods by ‘direct action’, is there a breach of Article 34 TFEU (ex Article 28 EC)?

5. What is the difference between a discriminatory and an indistinctly applicable measure?

6. Are the following rules discriminatory or indistinctly applicable?

a. margarine must be packaged in cube-shaped packages

b. importation of obscene materials is banned

c. cheese may contain no preservatives

d. cheese must bear a label stating fat content

e. all imported beef must be inspected.

Can you think of a few rules of each kind that you have come across recently?


10.4.3 Exceptions under Article 36 TFEU (ex Article 30 EC)


restrictions and measures having equivalent effect’, sections 10.16–10.56, pp.324–341.

Unlike Article 30 TFEU (ex Article 25 EC) in relation to financial charges, the prohibition of quantitative restrictions and MEQRs in Articles 34 and 35 TFEU (ex Articles 28 and 29 EC) is not absolute. The Treaty provides that such measures may be justified on one of six grounds listed in Article 36 TFEU (ex Article 30 EC). (Further justifications which only apply to ‘indistinctly applicable’ measures have been added as a result of the Court’s judgment in Cassis – see below.)

Activity 10.7Issue: when will a Member State be justified in imposing its own trading rules on imported goods?

According to the Dassonville definition of a MEQR (10.4.2 above), ‘all trading rules enacted by Member States which are capable of hindering, actually or potentially, directly or indirectly, intra-Community trade’ are prohibited by Articles 34 and 35 TFEU (ex Articles 28 and 29 EC) – unless justified.

All states have ‘trading rules’ relating to what can be sold, how, when, where, by whom, to whom goods can be sold, and sometimes rules on what marketing method or advertising can be used.

Think of an example of a rule which restricts trade in each of the following ways. What/whose interest do you think the rule is intended to serve or protect? Should a Member State be allowed to apply the rule to imported products?

1. A rule which restricts what can be sold.

2. A rule restricting how goods are presented for sale.

3. A rule restricting when goods are sold.

4. A rule restricting where goods are sold.

5. A rule restricting marketing methods used to promote goods.

Permissible derogations under Article 36 TFEU (ex Article 30EC)

Article 36 TFEU (ex Article 30 EC) states:

The provisions of Articles 34 and 35 TFEU (ex Articles 28 and Article 29 EC) shall not preclude prohibitions or restrictions on imports, exports or goods in transit 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 artistic, historic or archaeological value; – or the protection of industrial and commercial property.

Such prohibitions or restrictions shall not, however, constitute a means of arbitrary discrimination or a disguised restriction on trade between Member States.

Because it allows Member States exemption from one of the fundamental freedoms, the Court has construed Article 36 TFEU (ex Article 30 EC) narrowly, seeking to limit, rather than expand, the situations in which Member States can invoke these grounds.

Article 36 TFEU (ex Article 30 EC) can be used to justify both distinctly applicable (discriminatory) and indistinctly applicable rules.


10.4.4 Examples of the Court’s approach

Public morality

Case 34/79 R v Henn and Darby [1979] ECR 3795. Henn and Darby were prosecuted under English law for importing obscene films and magazines from the Netherlands into the UK. They raised a ‘eurodefence’: that this was contrary to the free movement of goods laid down by Article 34 TFEU (ex Article 28 EC). The case eventually reached the House of Lords and a preliminary reference was made to the Court of Justice as to whether the UK could rely on Article 36 TFEU (ex Article 30 EC) to prevent these imports on public morality grounds. The Court of Justice accepted that Article 36 TFEU (ex Article 30 EC) confers a discretion on the Member States to set their own standards in relation to public morality, provided that, as was the case, no lawful trade in such goods was allowed within the UK either:

In principle, it is for each Member State to determine in accordance with its own scale of values and in the form selected by it the requirements of public morality in its territory.

Contrast this case with Case 121/85 Conegate Ltd v HM Customs and Excise [1986] ECR 1007, which illustrates the rule that Article 36 TFEU (ex Article 30 EC) grounds must not be used to support ‘arbitrary discrimination or disguised restrictions’. The UK ban on inflatable ‘love dolls’ from Germany would be disproportionate in a situation where, within the UK, sale of such products was not banned, although there were certain restrictions on how and where they could be sold.

Public policy

This ground has rarely been used successfully in the Court of Justice, which has made clear that it cannot be used for economic reasons (Case 95/81 Commission v Italy [1982] ECR 2187). It was, however, successfully pleaded in the House of Lords case R v Chief Constable of Sussex ex p. International Trader’s Ferry Ltd [1999] 1 CMLR 1320 HL. Animal rights protesters were blockading the port of Shoreham, trying to prevent the (lawful) export of veal calves to France. ITF challenged the Chief Constable’s decision that protection for the lorries could only be provided on two days a week because of limited police resources. The Divisional Court agreed that the decision was a restriction on exports, contrary to Article 35 TFEU (ex Article 29 EC), but this ruling was reversed, with the Court of Appeal and House of Lords accepting the public policy justification: the state’s responsibility for ensuring the free movement of goods had to be balanced with the right of residents to policing, and with the right of peaceful protest.

Activity 10.8a. Compare this English case with Case C-265/95 Commission v France (above) which

also involved public protests obstructing free movement of goods. The public policy ground was rejected by the Court of Justice. What differences in the facts of the two cases might explain the different outcomes?

b. Read the extracts from Case 34/79 R v Henn and Darby and Case 121/85 Conegate Ltd and explain why the Court held that in Henn the ban was lawful (justified under public morality Article 36 TFEU (ex Article 30 EC)) and in Conegate it was not.

Public security

Case 72/83 Campus Oil [1984] ECR 2727. Importers of oil products into Ireland were obliged to buy 35 per cent of their requirements from the state oil refinery. Campus Oil argued that, as they could not import 100 per cent of their needs, this was a breach of Article 34 TFEU (ex Article 28 EC). The Court of Justice said that the maintenance of regular oil supplies, which were fundamental to the existence of the state, was a legitimate aspect of public security. However, the Court questioned whether the compulsory purchasing requirement, at a price above the world market price, was necessary to ensure the survival of the state oil refinery. If it reduced its prices to the world market price, would it not still get enough customers to survive? These issues

Go to your study pack and read the extract from Case 34/79 Regina v Maurice Donald Henn and John Frederick Ernest Darby.

Go to your study pack and read paragraphs 13–21 of the extract from Case 121/85 Conegate Ltd v HM Customs and Excise.


of fact were left to the national court (it was a preliminary reference). The judgment shows clearly the Court’s approach to the Article 36 TFEU (ex Article 30 EC) derogations: it is not enough for the Member State to invoke a legitimate objective covered by Article 36 TFEU (ex Article 30 EC). It has also to show that the measure in question is necessary for that purpose, and that it is proportionate. That means asking whether there is any other way of achieving the objective (in this case viability of the Irish state oil refinery) which would be less of a restriction on the free movement of goods.

The protection of health and life of humans, animals and plants

There are many cases where this ground has been pleaded. The following show the Court’s approach. The Court of Justice will consider whether the risk to health is genuine, or a disguised restriction on trade as was found in Case 40/82 Commission v UK (re Imports of Poultry Meat) [1982] ECR 2793, [1982] 3 CMLR 497.

Public health inspections of imports from other Member States have also attracted close scrutiny. Any inspection is, in principle, an MEQR because, even if there is no charge for it, it causes delay and is a hindrance to importation. The importing state must take into account evidence of any tests already complied with in the exporting state, and only if it can show those are insufficient can it require additional tests: see Case 124/81 Commission v United Kingdom [1983] ECR 203 (UHT milk). See also: Case 272/80 Frans-Nederlandse Maatschappij voor Biologische Producten [1981] ECR 3277. Case C-170/04 Klas Rosengren and Others v Riksåklagaren [2007] ECR I-4071 was a challenge to the lawfulness of a Swedish measure prohibiting the import of alcoholic beverages by private individuals into Sweden; it was possible for individuals to ask the holder of the retail sale monopoly, on request, to supply and, if necessary, to import the alcoholic drinks in question.

The Court found that the measure was unsuitable for attaining the objective of limiting alcohol consumption generally and not proportionate for attaining the objective of protecting young persons against the harmful effects of such consumption. Therefore, the measure was caught by Article 34 TFEU (ex Article 28 EC) and not justified under Article 36 TFEU (ex Article 30 EC).

Case C-322/01 DocMorris [2003] ECR I-4887: a German law prohibiting the sale of medicines by mail order over the internet was held to be caught by Article 34 TFEU (ex Article 28 EC) and to be discriminatory as ‘for pharmacies not established in Germany, the internet provides a… significant way to gain direct access to the German market’. The prohibition therefore had a greater impact on pharmacies established outside Germany and could impede access to the market for products from other Member States more than it impeded access for domestic products.

The Court of Justice held that the rules were justified and proportionate in so far as they applied to medicines which could only be obtained with a prescription in German, but could not be justified in regard to medicines which did not need a prescription.

Case C-212/03 Commission of the European Communities v French Republic [2005] ECR I-4213. The import of medicinal products into France by private persons, not affected by personal transport, was prohibited by a rule which stated that prior authorisation was needed. Medicinal products caught by this rule included products licensed in France and the Member State of purchase, homeopathic products, and products licensed only in the Member State of purchase. Challenging this rule, the Commission argued that France had failed to fulfil its obligations under Article 34 TFEU (ex Article 28 EC). The Court found that the prior authorisation procedure for personal imports was disproportionate to the objectives of the rule and went beyond what was necessary to ensure the objectives.

The Court will take into account the attitude of other Member States and of international health bodies such as the World Health Organisation when assessing whether particular additives pose a real risk to health. In Case 178/84 Commission v Germany (Additives in Beer) [1987] ECR 1227, [1988] 1 CMLR 780, Germany prohibited a large number of additives to beer. These were permitted in other Member States. The Court of Justice was not swayed by the argument that they posed an increased danger to German consumers because so much beer was consumed in Germany!

Go to your study pack and read paragraphs 13–14 of the extract from Case 272/80 Criminal Proceedings Against Frans-Nederlandse Maatschappij voor Biologische Producten BV.

Go to your study pack and read paragraphs 25–54 of the extract from Case 178/84 Commission of the European Communities v Federal Republic of Germany.


Case C-67/97 Criminal Proceedings against Ditlev Bluhme [1998] ECR I-8033 concerned the protection of the life of animals under Article 36 TFEU (ex Article 30 EC). It was held that a ban on imported bees into the Danish island of Laeso to protect the native bee from more aggressive species was justified and proportionate.

The precautionary principle

Where the available scientific evidence on the health impact of particular substances is unclear, the Court said in Case 174/82 Sandoz [1983] ECR 2445, concerning vitamins added to Muesli bars, that Member States can decide what level of protection is appropriate, subject to the proportionality rule:

… in so far as there are uncertainties at the present state of scientific research it is for the Member States, in the absence of harmonisation, to decide what degree of protection of the health and life of humans they intend to assure, having regard however for the requirements of the free movement of goods within the Community (paragraph 15).

This principle has been defined in further cases on the sale of foods enriched with added vitamins and minerals.

In Case C-192/01 Commission v Denmark [2003] ECR I-9693, the Court confirmed that Member States can adopt their own precautions in situations where the precise risks to health are uncertain, but said that any such precautions must be necessary and proportionate. Denmark had argued that the normal Danish diet was sufficient in nutrients. The Court held that the Member State must show that the products posed a real risk to public health: it was not enough to show that the product did not meet a need among the Danish population.

The requirements in cases where there is controversy as to the health risks were summarised by the Court in case C-41/02 Commission v Netherlands [2004] ECR I-11375. Marketing of foods fortified with vitamins and minerals was subject to prior proof of a nutritional need in the Netherlands population. This was clearly an MEQR, but could it be justified on the basis of the precautionary principle?

The Court held (paragraphs 47–53) that the Member State must carry out a risk assessment to measure the probable harmful effects on human health and the seriousness of those potential effects. In doing so they may ‘take into consideration the cumulative effect of the presence on the market of several sources, natural or artificial, of a particular nutrient and of the possible existence in the future of additional sources which can reasonably be foreseen’.

The greater the uncertainty, in science and in practice, the greater the Member State’s discretion in applying the precautionary principle. It does not need to wait until the existence and extent of the risks are clearly established.

The Court said that the proper application of the precautionary principle requires:

the identification of the potentially negative consequences for health of the proposed addition of nutrients

a comprehensive assessment of the risk for health based on the most reliable scientific data available and the most recent results of international research

where data on the existence or extent of the alleged risk is insufficient, inconclusive or imprecise, ‘but the likelihood of real harm to public health persists should the risk materialise, the precautionary principle justifies the adoption of restrictive measures’ (paragraphs 53–54).

The burden of proving that a particular substance is harmful is on the Member State: it is not up to the importer to prove that it is safe. An example of a Member State failing to discharge this burden is C-420/01 Commission v Italy (Caffeine) [2003] ECR I-6445. The prohibition of sale of an energy drink with excess caffeine was a breach of Article 34 TFEU (ex Article 28 EC) and could not be justified under Article 36 TFEU (ex Article 30 EC) as it had not been shown that this was necessary for the protection of public health.

Go to your study pack and read paragraphs 11–20 of the extract from Case 174/82 Criminal Proceedings Against Sandoz BV. Contrast this case with Case 178/84 Commission v Germany (beer purity) above.


10.4.5 The approach to ‘indistinctly applicable rules’The Cassis de Dijon case – Case 120/78 Rewe-Zentral AG v Bundesmonopolverwaltung für Branntwein (‘Cassis de Dijon’) [1979] ECR 649 – is one of the most important cases in EU law and a good example of the Court of Justice’s dynamic and creative approach.

The case:

expressly extended the reach of Article 34 TFEU (ex Article 28 EC) to catch indistinctly applicable rules

introduced the possibility of justification for indistinctly applicable measures (only) under the ‘mandatory requirements’, as long as the national measures are proportionate (suitable to achieve their aim and less restrictive means)

introduced the principle of ‘mutual recognition’.

This case developed the approach, which has its roots in the Dassonville case, towards ‘indistinctly’ applicable measures (that is those which apply both to imports and domestic goods).

Although such rules apply equally in law, in fact they do impose an extra burden on imported goods. This is because domestic goods will have been manufactured to comply with the rules applicable in their home state; imported goods meet the standards set in their home state but now also have to comply with the rules of the importing state. Thus, the exporter has to satisfy two sets of rules, those of the home state and those of the state of import, whereas goods sold on the domestic market have only to comply with one set of rules, those of the home state. Indistinctly applicable rules are sometimes referred to as ‘dual burden’ rules because of the double regulatory burden that results for imported goods.

In the Cassis case, the rule at issue was the German requirement that fruit liqueurs must have an alcohol strength of 25 per cent. The French blackcurrant liqueur, Cassis, had a strength of 15–20 per cent and therefore could not be sold in Germany. The German rule, although apparently non-discriminatory, in fact made it impossible for French manufacturers to export Cassis to Germany. To change the strength would be uneconomic. The German rule effectively amounted to an import ban.

Principle of mutual acceptance

In this case, the Court of Justice laid down the ‘principle of mutual recognition’, that is, that goods ‘lawfully produced and marketed’ in one Member State should be able to be freely marketed in all the others.

The Court also ruled in Cassis that, where there are no harmonised European Union rules (i.e. a Directive or Regulation) on the matter in question, Member States can still have their own rules for domestic producers, but they can require imported goods to comply with their national rules only if the following conditions are fulfilled:

the rule in question applies equally to domestic products

the rule is necessary to protect an essential public interest (what the Court calls a ‘mandatory requirement’)

it is ‘proportionate’ (i.e. is not more restrictive/burdensome than necessary to protect that interest).

Measures which fulfil this test fall outside the scope of Article 34 TFEU (ex Article 28 EC) and are legal.

The Cassis ‘mandatory requirements’

The so-called ‘mandatory requirements doctrine’, which has its origins in the Cassis ruling, provides an additional list of grounds on which Member States can justify imposing their national rules on imported goods but, unlike the Article 36 TFEU (ex Article 30 EC) grounds, mandatory requirements can only be used to justify indistinctly applicable rules (see Commission v Ireland (souvenirs) below).

Go to your study pack and read paragraphs 1–15 of the extract from Case 120/78 Rewe-Zentral AG v Bundesmonopolverwaltung für Branntwein (‘Cassis de Dijon’).


The list of mandatory requirements is not a closed group. The list given by the court in Cassis was by way of example and has since been added to – and no doubt will continue to be added to as new issues of public concern emerge. Therefore it provides for a more flexible response than Article 36 TFEU (ex Article 30 EC). The least restrictive means must be used to protect the mandatory requirement. (The Court of Justice often puts forward labelling as a suitable method.)

The original four ‘mandatory requirements’ were consumer protection, fiscal measures, public health and fairness of commercial transactions. Since then other public interests have been recognised as sometimes justifying restrictions on the free movement of goods: environmental protection, media pluralism, preservation of national culture. Here are some examples of the Court’s approach:

Consumer protection

Case 261/81 Walter Rau [1982] ECR 3961 (Belgian margarine). Belgian rules stated that margarine sold in Belgium must be packaged in cube-shaped containers. Belgium based its case on the mandatory requirement of consumer protection: that the packaging rule was to prevent confusion with butter. The result of the rule was to make imports of margarine from countries where margarine is normally packaged in tubs or rectangular blocks more difficult or impossible (repackaging would make the sale uneconomic). The Court held that the rule could not be imposed on imported margarine because it was disproportionate – clear labelling would be enough to prevent confusion with butter.

An Italian rule that only pasta made from durum wheat could be sold in Italy was struck down in Case 407/85 Drei Glocken GmbH v USL Centro Sud [1988] ECR 4233. Italy argued that Italian consumers would assume that all pasta on sale was made with this traditional ingredient. The result was that imported German pasta could not be sold. The Court was not prepared to endorse such a paternalistic approach to the consumer and said that a clear label as to the type of wheat used would be enough.

Consumer protection arguments were upheld in 286/81 Oosthoek [1982] ECR 4575, [1983] 3 CMLR 428 (use of free gifts to sell encyclopaedias) and in 382/87 Buet [1989] ECR 1235, [1993] 3 CMLR 659 (doorstep-selling of educational materials). However, there is doubt as to whether these cases would be decided in the same way today, in view of the ruling on selling arrangements in Keck (see Section 10.4.7 below).

Public health

The Court of Justice has ruled that as Article 36 TFEU (ex Article 30 EC) provides for derogation on this ground, the Treaty Article should be used in preference to the ‘mandatory requirements’: C-1/90 and 176/90 APESA v DSSC (Aragonesa) [1991] ECR l-4151.

Protection of the environment

See Case 302/86 Commission v Denmark [1988] ECR 4607 (recyclable beverage containers) and Case C-2/90 Commission v Belgium [1992] ECR I-4431, [1993] 1 CMLR 365.

Case C-320/03 Commission v Austria [2005] ECR I-9871: this case is a good example of application of the principle of proportionality. Compare with C-112/00 Schmidberger below.

Austria had put in place a ban on lorries of over 7.5 tonnes transporting certain goods (such as waste, stone, timber) using the A 12 highway for a distance of 46 kilometres. The road is the main transit route between the south of Germany and Italy.

The Court of Justice accepted that this was justified under the mandatory requirement of ‘protection of the environment’ but held that it was not proportionate. The Austrian authorities had declared that they wanted a shift from road to rail transport for such heavy goods but had not ensured that there was adequate and sufficient rail transport available or alternative means of transporting the goods by road routes. They had not considered whether there were other ways of reducing the air pollution caused by the traffic that were less restrictive of the free movement of goods. The transitional

A note on terminology: while Article 36 TFEU (ex Article 30 EC) creates ‘exceptions’ to Article 34 TFEU (ex Article 28 EC), it is usually stated by academic writers that national laws which are justified by a mandatory requirement are then ‘outside the scope’ of Article 34 TFEU (ex Article 28 EC). There is no practical difference in the end result, that is, to be legal it must be justified!

Go to your study pack and read paragraphs 8–22 of the extract from Case 302/86 Commission of the European Communities v Kingdom of Denmark.

Go to your study pack and read paragraphs 21–25 and 84–91 of the extract from Case C-320/03 Commission of the European Communities v Republic of Austria.


period of two months between the adoption of the ban and its implementation ‘was clearly insufficient reasonably to allow the operators concerned to adapt to the new circumstances’.

The Austrian measures were therefore caught by Articles 34 and 35 TFEU (ex Articles 28 and 29 EC) and were justified but not proportionate.

Culture

See Case 60 and 61/84 Cinetheque SA v Federation Nationale des Cinémas Français [1985] ECR 2605.

Protection of national or regional socio-cultural characteristics

See Case 145/88 Torfaen BC v B & Q plc [1989] ECR 3851.

Plurality of the press

See Case 368/95 Familiapress v Heinrich Bauer Verlag [1997] ECR I-3689, [1997] 3 CMLR 1329.

The protection of fundamental rights

Case 112/00 Schmidberger v Austria [2003] ECR 1-5659. See Chapter 8, Section 8.3.1, Protection of fundamental human rights, for a summary of this case.

Mandatory requirements can only be used to justify indistinctly applicable measures

Mandatory requirements can only be invoked when the measure in question is indistinctly applicable. If the national rule is discriminatory then Article 36 TFEU (ex Article 30 EC) must be used. In Case 113/80 Commission v Ireland (Souvenirs) [1981] ECR 1625, the Irish government sought to justify a rule that imported souvenirs carry a label marked ‘foreign’. There was no labelling requirement for domestically produced souvenirs. The Court refused to consider the justification on the basis of consumer protection as the rule only applied to imports (i.e. was discriminatory) and Article 36 TFEU (ex Article 30 EC), which was the only possible basis for justifying discriminatory measures, did not include consumer protection.

The difference between the Article 36 TFEU (ex Article 30 EC) grounds and the Cassis mandatory requirements: a summary

The six grounds listed in Article 36 TFEU (ex Article 30 EC) can be invoked by Member States to justify both discriminatory and ‘indistinctly applicable’ national rules, but the list has been strictly interpreted and the Court has refused to extend it.

Discriminatory rules: State measures and rules which only apply to imported goods and not to the equivalent domestically-produced goods (they are sometimes called ‘distinctly applicable’ measures). Such rules are always illegal under Articles 34 and 35 TFEU (ex Articles 28 and 29 EC) unless justified under Article 36 TFEU (ex Article 30 EC).

Indistinctly applicable rules: these are rules which appear to apply equally to both imported and domestic goods but which in fact impose an extra burden on imports because they then have to comply with two sets of rules: those of their ‘home’ state and those of the importing state. They are illegal under Article 34 TFEU (ex Article 28 EC) unless justified under Article 36 TFEU (ex Article 30 EC) or by a Cassis mandatory requirement.

A note on Article 35 TFEU (ex Article 29 EC): exports

Unlike the prohibition in Article 34 TFEU (ex Article 28 EC), the prohibition in Article 35 TFEU (ex Article 29 EC) encompasses only directly discriminatory measures. Indistinctly applicable measures – that is, those that apply equally to national products and to exports – are not caught by this provision. See: Case 15/79 P.B. Groenveld BV v Produktschap voor Vee en Vlees [1979] ECR 3409.

Go to your study pack and read paragraphs 10–12 and 18–34 of the extract from Case C-368/95 Vereinigte Familiapress Zeitungsverlags- und vertreibs GmbH v Heinrich Bauer Verlag.

Go to your study pack and read paragraphs 78–94 of the extract from Case C-112/00 Eugen Schmidberger, Internationale Transporte und Planzüge v Republik Österreich. Compare this case with Case C-320/03 Commission of the European Communities v Republic of Austria, above.


Case 53/76 Bouhelier [1977] ECR I-197, was a requirement for quality control inspections on watches exported from France. This was discriminatory as there was no requirement for watches sold on the domestic market to be inspected. This was held to be a breach of Article 34 TFEU (ex Article 28 EC).

See also Case C-47/90 Établissements Delhaize Frères et Compagnie Le Lion SA v Promalvin SA and AGE Bodegas Unidas SA [1992] ECR I-3669 discussed in regard to quantitative restrictions above.

10.4.6 Effect of European Union harmonisation measuresWhere fully harmonised European Union rules exist – for example in a Directive on the matter in question – it is no longer open to Member States to rely on the Article 36 TFEU (ex Article 30 EC) or Cassis grounds. In Case 190/87 Moorman [1988] ECR 4689, there was a harmonised European Union system of animal and plant health inspections. Poultry meat was to be inspected by the exporting state. The Court said:

where… Community directives provide for the harmonisation of the measures necessary to ensure… the protection of animal and human health and establish Community procedures to check that they are observed, recourse to Article 36 TFEU (ex Article 30 EC) is no longer justified.

In Moorman, the rules were totally harmonised, but European Union harmonisation measures frequently involve only partial harmonisation of a particular field, or only seek to lay down minimum standards. In such cases, there may still be scope for Member States to impose their own rules, relying on Article 36 TFEU (ex Article 30 EC) or a Cassis ‘mandatory requirement’. An illustration is the case of Sandoz (above): there was a European Union Directive on additives to food but it did not deal with vitamins. With regard to vitamins, therefore, it was still possible for a Member State to invoke Article 36 TFEU (ex Article 30 EC) to justify imposing its own rules on imported goods.

Even where there is a European Union Directive laying down uniform rules, there is limited scope for Member States to obtain permission from the Commission to maintain or introduce their own rules. The relevant grounds and procedure are laid down in Articles 114(4–9) TFEU (ex Article 95(4–9) EC).

Mutual Information Directive

Directive 98/34/EC (the Mutual Information or Transparency Directive) requires Member States to inform the Commission before introducing new, legally enforceable technical specifications. The Commission then passes the information on to other Member States and there is a period of three months before the Member State can adopt the measure. If the Commission decided to adopt harmonising legislation covering the requirements, national legislation can be delayed for a year.

Activity 10.9Mary makes organic bread and has a successful business supplying health food shops in the UK. She wishes to start selling through shops in France, but has encountered a problem.

France lays down a maximum permitted salt content for bread of 0.5 milligrams per kilo. Mary’s bread typically contains 0.75 milligrams of salt, and she has been told that she cannot sell it in France. There is an EU Directive on salt levels in bread, which permits up to 0.75 milligrams per kilo, but it is not yet in force as Member States have another year in which to implement it. Does Mary have a case against France?

Activity 10.10 The aim of this activity is to examine the scope for Member States to derogate from the European Union rules (Articles 34 and 35 TFEU (ex Articles 28 and 29 EC)) prohibiting quantitative restrictions and measures of equivalent effect in intra-European Union trade. Look up the following cases and produce, and weigh the


merits of, arguments in favour of, and against, the likelihood of derogation in any given circumstances in the light of a sound knowledge of the European Court’s approach.

a. 407/85 Drei Glocken GmbH v USL Centro Sud [1988] ECR 4233

b. 302/86 Commission v Denmark (metal cans) [1998] ECR I-4607, [1989] 1 CMLR 619

c. 207/83 Commission v UK (origin marking) [1985] ECR 1201

d. 286/86 Deserbais (Edam Cheese) [1988] ECR 4907, [1989] 1 CMLR 516

e. 448/98 Jean-Pierre Guimont [2000] ECR I-10663

f. C-123/00 Bellamy and English Shop Wholesale [2001] ECR I-2795

g. C-12/00 Commission v Spain (Chocolate) [2003] ECR I-459

h. C-184/96 Commission v France (Foie Gras rules) [1998] ECR I-6197.

Consider the following questions in relation to each case.

1. What was the national measure which was alleged to restrict trade and in what way? Was it discriminatory or indistinctly applicable?

2. What argument did the Member State put forward to justify the measure? (Was it based on Article 36 TFEU (ex Article 30 EC) or a Cassis mandatory requirement?)

3. Was there any relevant European Union harmonisation measure on the subject? If so, what effect did it have on the national rule in question?

4. Was the objective of the national measure considered legitimate by the Court of Justice? If so, why? If not, why not? Was the national rule necessary to achieve the objective? Was it proportionate? How did the Court of Justice decide this question?

5. Did the Court’s ruling give precedence to the free movement of goods or to another public interest? Do you agree with the approach taken by the Court? (Give reasons).

No feedback provided, as the answers are to be found in the cases.

10.4.7 Drawing the line on the scope of Article 34 TFEU (ex Article 28 EC) – the Keck judgment


restrictions and measures having equivalent effect’, sections 10.56–10.88, pp.341–357.

In a few cases, the Court of Justice has held national rules to be outside the scope of Article 34 TFEU (ex Article 28 EC). (See for example: 75/81 Blesgen [1982] ECR 1211; 155/80 Oebel [1981] ECR 1993; 23/89 Quietlynn (sex shops) [1990] ECR I-3059).

However, the very wide definition of a MEQR in Dassonville, combined with its extension in Cassis to catch indistinctly applicable measures, generated a huge number of challenges to national rules based on Article 34 TFEU (ex Article 28 EC). Rules would be challenged and then justified under an ever-growing list of mandatory requirements. It could be argued, as Advocate General Slynn did in Cinéthèque, that some of these rules were not intended to restrict imports and did not in any way make things more difficult for the importer than the domestic producer and should not be caught by Article 34 TFEU (ex Article 28 EC) at all.

This issue came to a head in the ‘Sunday trading’ cases, see Case 145/88 Torfaen Borough Council v B&Q plc [1989] ECR 3851 and Case C-169/91 Stoke-on-Trent City Council and Norwich City Council v B&Q plc [1992] ECR I-6635. A national law restricting what kinds of goods could be sold on Sunday restricted the sale of imported goods to exactly the same extent as the sale of domestically produced goods (it imposed an ‘equal burden’), yet the Court of Justice still required such a rule to be justified.


Finally, in Joined Cases C-267 and C-268/91 Criminal Proceedings against Keck and Mithouard [1993] ECR I-6097, [1995] 1 CMLR 101, the Court accepted the argument that a clear limit should be placed on the types of measure caught by Article 34 TFEU (ex Article 28 EC).

The Court of Justice declared that ‘contrary to what has previously been decided’, Article 34 TFEU (ex Article 28 EC) would not apply to:

certain selling arrangements... provided that [they] apply to all relevant traders in the national territory... and affect in the same way, in law and in fact, the marketing of domestic products and those from other Member States [paragraph 16].

The judgment creates two categories of trading rules: those which lay down ‘product requirements’, affecting in some way the goods themselves, and ‘selling arrangements’ which do not require any change to the product itself but only restrict the way it is marketed.

‘Product requirements’ are still governed by the existing rules on discriminatory and dual burden measures. ‘Selling arrangements’ fall outside the scope of Article 34 TFEU (ex Article 28 EC) and are legal. They do not have to be justified or proportionate under European Union law.

The post-Keck case law

Examples of selling arrangementsSee: Case C-292/92 Hünermund [1993] ECR I-6787 (rules on advertising of products in pharmacies); Case C-69/93 Punto Casa [1994] ECR I-2355 (opening hours); Case C-391/92 Commission v Greece [1995] ECR I-1612 (restriction on where baby milk powder could be sold); and Case 412/93 Leclerc-Siplec [1995] ECR I-179 (restriction on TV advertising of retail products).

The Court of Justice in Keck did not state which earlier cases were overruled, but it is likely, for example, that the rules in the following cases would now be regarded as ‘selling arrangements’: Case 60, 61/84 Cinéthèque [1985] ECR 2605 (timing of sales of videos); Case 286/81 Oosthoek [1982] ECR 4575, [1983] 3 CMLR 428 (use of free gifts in marketing strategy), and Case 328/87 Buet v Ministère Public [1989] ECR 1235 (doorstep selling of educational materials).

Since Keck, the Court has reaffirmed the continued importance of the Cassis principle in relation to obstacles to trade caused by disparities between national laws governing product presentation and composition (i.e. where the Keck test has not been fulfilled).

Some cases have concerned marketing rules which nonetheless have an effect on the product itself.

In Case 315/92 Clinique [1994] ECR I-317, a German law, which prohibited the use of the name ‘Clinique’ for cosmetics, because the consumer might be confused and think that the product had medicinal properties, was challenged under Article 34 TFEU (ex Article 28 EC). It was held by the Court of Justice to be disproportionate to satisfy the requirements of consumer protection and the health of humans. See: Case C-470/93 Verein gegen Unwesen im Handel v Mars ‘Mars’ [1995] ECR I-1923 (promotion printed on the wrapper of the Mars bar was part of the product itself).

Case 368/95 Familiapress v Heinrich Bauer Verlag [1997] ECR I-3689, [1997] 3 CMLR 1329 concerned Austria’s law on ‘unfair competition’ which forbade the offering of large cash prizes for competitions in magazines. Familiapress is a publisher of newspapers in Austria. German newspapers and magazines could be sold in Austria (also German speaking), and Familiapress brought proceedings against a German publisher of weekly magazines which were being sold in Austria and which offered large cash prizes for crossword competitions.

This was held not to be a selling arrangement under Keck, because the law ‘bears on the actual content of the products... the competitions in question form an integral part of the magazine... Since it requires traders... to alter the contents of the

Go to your study pack and read paragraphs 12–18 of the extract from Joined Cases C267-91 and C-268/91 Criminal proceedings against Bernard Keck and Daniel Mithouard.

Go to your study pack and read section c, paragraph 37 and section d, paragraphs 38–55 of the extract from Case 412/93 Société d’Importation Edouard Leclerc-Siplec v TF1 Publicité SA and M6 Publicité SA.


periodicals…’. It is an MEQR. It was justified to protect press diversity (the aim was to protect the local press which could not offer high value prizes); it was for the national court to decide whether it was proportionate.

A rule of thumb for distinguishing between a ‘product requirement’ and a ‘selling arrangement’ is to ask yourself whether, in order to comply with this rule, the importer has to make any physical alteration to the product, for example, change the ingredients, packaging, labelling. If so, it is a ‘product requirement’. If not, it is a ‘selling arrangement’. ‘Selling arrangements’ concern where, when and how goods are to be sold.

The Court has applied Keck in a formalistic way which has been criticised by many commentators, particularly in relation to advertising restrictions. In a highly influential Opinion in the case Leclerc-Siplec, Advocate General Jacobs identified potential problems with the Keck formula, pointing out that domestic products are probably already known to consumers, whereas products from other Member States are more dependent on advertising to penetrate new markets. In his conclusion in his Opinion in Leclerc-Siplec, Advocate General Jacobs applied the Keck formula and decided that the national rule fell outside Article 34 TFEU (ex Article 28 EC). However, the issues he raised in the Opinion were relevant to the judgment of the Court of Justice in Cases C-34–36/95 De Agostini and C-405/98 Konsumentombudsmannen (KO) v Gourmet International Products, see below.

Refinement of the Keck test

An interesting case in which the Court held that a ‘selling arrangement’ discriminated against foreign traders in fact is: Case 254/98 Schutzverband gegen unlauteren Wettbewerb v TK Heimdienst GmbH [2000] ECR I-151. Under the Austrian Code of Business and Industry 1994, traders such as bakers, butchers and grocers were only permitted to offer for sale on rounds from locality to locality or from door-to-door goods which they also sold from a permanent establishment in the area or in an adjacent municipality.

The Schutzverband, an association for the protection of the economic interests of undertakings, brought an action against TK-Heimdienst to restrain it from offering for sale on rounds groceries which it did not sell in permanent establishments in that municipality or any adjacent one.

The Court of Justice held that the legislation in question related to ‘selling arrangements for certain goods’ but that it did not affect in the same manner the marketing of domestic products and that of products from other Member States. It did not apply equally in law and in fact. The rule ‘in fact impedes access to the market of the Member State of importation for products from other Member States more than it impedes access for domestic products’.

Therefore the Austrian law did fall within the scope of Article 34 TFEU (ex Article 28 EC) despite being described by the Court of Justice as a selling arrangement. An argument that the rule could be justified under Article 36 TFEU (ex Article 30 EC) as a measure to protect human health was rejected because the measure was held to be disproportionate.

A key case concerning a selling arrangement which did not apply equally in fact is: Case 405/98 Konsumentombudsmannen (KO) v Gourmet International Products (GIP) [2001] ECR I-1795.

The case concerned an application for an injunction by the Swedish Ombudsman responsible for consumer protection preventing Gourmet International Products (GIP) from placing advertisements for alcoholic beverages in magazines.

A Swedish law was effectively a total ban on advertising alcoholic beverages, prohibiting the advertising of such drinks on radio, television or in magazines and periodicals other than those sold at the point of sale. GIP published a magazine called Gourmet which contained advertisements for red wine and whisky.

Go to your study pack and read paragraphs 18–25 and 39 of the extract from Case C-405/98 Konsumentombudmannen (KO) v Gourmet International Products AB (GIP).


The reference to the Court of Justice from the Swedish court asked whether Article 34 TFEU (ex Article 28 EC) or Article 56 TFEU (ex Article 49 EC) precluded legislation entailing a general prohibition on alcohol advertising, such as the one at issue and whether, if so, such a prohibition could be justified on the grounds of public health.

The Consumer Ombudsman and the French, Danish, German and Austrian governments argued that such a law on advertising fell within Keck, and was therefore not within Article 34 TFEU (ex Article 28 EC). The Court of Justice rejected this argument.

It pointed out that paragraph 17 of Keck states that national provisions prohibiting certain selling arrangements must not impede access to the market for products from another Member State or must not impede access more than they impede the access for domestic goods.

The Court concluded that a prohibition on advertising such as the one at issue was liable to impede access to the market for products from other Member States more than for domestic products with which consumers are already familiar.

Therefore the prohibition on advertising affected the marketing of products from other Member States more than the marketing of domestic products and was caught by Article 34 TFEU (ex Article 28 EC).

So the Court is recognising the importance of advertising as a way for new products to break into a market.

Although the sales of wine and whisky, which are imported, were increasing faster than sales of domestically produced vodka, the Court of Justice held that the sales of these imported beverages might have grown even faster without the ban on advertising.

As to justification under Article 36 TFEU (ex Article 30 EC), on the grounds of public health, the Court of Justice accepted the justification for the rule. It stated that, as this required an analysis of the circumstances of law and of fact which characterised the situation in the Member State concerned, it was for the national court to determine:

whether it was proportionate

whether ‘the protection of public health against the harmful effects of alcohol can be ensured by measures having less effect on intra-Community trade’.

The Court of Justice accepted that the rule could be justified on the grounds of public health and stated that it was for the national court to determine whether it was proportionate.

This case (and see also the case which preceded it, Case C-34–36/95 De Agostini [1997] ECR I-3843) indicates that advertising bans which ‘prevent access to the market by products from another Member State or impede access more than they impede the access of domestic goods, despite being selling arrangements, will nonetheless be caught under Article 34 TFEU (ex Article 28 EC).

The Court of Justice has refined the Keck test so that it is no longer a question simply of asking whether a change to the product itself is required, but whether ‘access to the market’ is made more difficult for imported products.

See also Case C-322/01 DocMorris [2003] ECR I-4887 discussed above.

Self-assessment questions1. What reasons did the Court of Justice give for its change of approach to Article 34

TFEU (ex Article 28 EC) in the Keck case?

2. The Court of Justice decides that ‘national provisions restricting or prohibiting certain selling arrangements’ fall outside the Dassonville formula provided that certain conditions are met: what are those conditions?

3. Would the result in Mars have been different if the ‘10 per cent extra’ slogan had featured in a poster advertising campaign rather than on the product label?

4. Does the Court’s ruling in Gourmet change the Keck test? If so, what is now the test to be applied?


Activity 10.11Analysis of national ‘trading rules’ under Article 34 TFEU (ex Article 28 EC). We have seen that there are three kinds of national measure:

1. discriminatory

2. indistinctly applicable/dual burden (Cassis type)

3. equal burden (Keck type).

Your client wants to know whether rules a–f below can be challenged.

In working out your answer you should follow these three steps:

Step 1 You must first decide which of these types of rule it is. If you get this wrong, the rest of your advice will be wrong!

Step 2 Now advise your client: is the rule legal? Is it prima facie illegal? If the latter, what are the chances of the Member State being able to justify it under Article 36 TFEU (ex Article 30 EC), or by invoking a Cassis ‘mandatory requirement’? What would the Member State have to prove?

Step 3 What if there is a European Union Directive harmonising national rules on the matter?

Is it ‘minimal harmonisation’ (still scope for stricter national rules)?

Is it ‘partial harmonisation’ (the particular aspect is not covered: some scope for national rules remains)?

Is it ‘total harmonisation’ (no scope for stricter national rules)?

This depends on what the Directive in question actually says.

If it clearly rules out stricter national rules, may a Member State get authorisation under Article 114 TFEU (ex Article 95(4) to (9) EC)?

The trading rules in question:

a. milk must be packaged in recyclable containers

b. fruit conserve must contain at least 60 per cent fruit

c. wine must bear a label stating alcohol content

d. all imported poultry must be inspected

e. tobacco can only be sold from licensed premises

f. advertisements for alcoholic drinks on street hoardings are forbidden.

10.5 Harmonisation measures under Article 114 TFEU (ex Article 95 EC)

10.5.1 Positive measuresAs we saw in the introduction, positive measures are also needed for the creation of a single market. Article 114 TFEU (ex Article 95 EC) provides the legal basis, allowing measures to be adopted ‘which have as their object the establishment and functioning of the internal market’. In the original Treaty, unanimity was needed for the adoption of harmonisation measures and, as this was hard to achieve, progress was slow. In this context the Court’s establishment of the principle of mutual recognition in Cassis was particularly important, requiring Member States to accept each other’s products even in the absence of harmonised standards.

Cassis also triggered a ‘new approach’ to harmonisation measures. The old approach was to lay down very detailed and comprehensive rules for particular products which would then apply in a uniform way throughout the European Union. After Cassis, the Commission realised that a uniform approach was no longer necessary – Member States would accept products lawfully produced and marketed in other Member


States, and European Union rules only needed to ensure protection of essential public interests. The process of harmonisation was given a further boost in the Single European Act 1986 which abolished the need for unanimity, replacing it with the cooperation procedure and qualified majority voting in all but the most sensitive fields (taxation, free movement of persons, employment rights). Following Maastricht, the co-decision procedure now applies.

Since 1987, large numbers of harmonisation measures have been adopted with the aim of ‘completing’ the single market. As we saw in Section 10.4.6 above, harmonisation measures facilitate the free movement of goods specifically by reducing the scope for Member States to impose their own rules on Article 36 TFEU (ex Article 30 EC) or Cassis grounds.

SummaryArticle 114 TFEU (ex Article 95 EC) can be used to adopt measures harmonising national rules where:

there are not simply differences in national rules but where those differences actually obstruct free movement and the measure has the genuine aim of overcoming those obstacles

it will actually help overcome those obstacles in practice.

Harmonisation measures can be ‘prospective’ in nature, that is, designed to prevent future problems caused by the adoption of differing national measures. The emergence of such obstacles in the future must be likely and the measure must be designed to prevent them.

Useful further reading Barnard, C. ‘Fitting the Remaining Pieces into the Goods and Persons Jigsaw?’ ELR

2001 (London: Sweet and Maxwell, 2001) [ISBN 03075400] pp.35-59. This article is available in your study pack.

Barnard, C. Substantive Law of the EU: The Four Freedoms. (Oxford: Oxford University Press 2010) third edition [ISBN 9780199562244].

Chalmers, D. ‘Repackaging the Internal Market – The ramifications of the Keck Judgment’, 1994, EL Rev 385.

von Heydebrand, L. ‘Free movement of foodstuffs, consumer protection and food standards in the EC: Has the Court of Justice got it wrong?’, 1991, ELRev 391.

Ludwigs, M. ‘Case C-380/03, Federal Republic of Germany v European Parliament and Council of the European Union (Tobacco Advertising II). Judgment of the Court (Grand Chamber) of 12 December 2006’, 2007, CMLRev 44: 1159–1176.

Oliver P. and S. Enchelmaier ‘Free movement of goods: recent developments in the case law’, 2007, CMLRev 44: 649–704.

Roth, P. ‘Note on Keck and Hünermund’, 1994, CML Rev 31: 845–855.

Tryfonidou, A. ‘Case C-293/02 Jersey Produce Marketing Organization Ltd. v States of Jersey and Jersey Potato Export Marketing Board, Judgment of the Court (Grand Chamber) of 8 November 2005’, nyr, 2006, CMLRev 43: 1727–1742.

Tryfonidou, A. ‘The Outer Limits of Article 28ED: Purely internal situations and the development of the Court’s approach through the years’ 2007, available at http://ssrn.com/abstract=1029248

Weatherill, S. ‘After Keck: Some Thoughts on How to Clarify the Clarification’, 1996, CMLRev 33: 885–906.

Weatherill, S. ‘Recent case law concerning the free movement of goods: mapping the frontiers of market deregulation’, 1999, CML Rev 36: 51–85.

White, E. ‘In Search of the Limits to Article 30 of the EEC Treaty’, 1989, CMLRev 26: 235–280.


Sample examination questionsQuestion 1 ABC Ltd is the major French producer of goat’s cheese. It sends a shipment of cheese to a distributor in the United Kingdom, but the shipment is refused entry at the port of Dover. The reasons given by the customs authority for refusing entry are: first, that the cheese is not labelled in English; secondly, that it is packed in cubic containers and therefore does not satisfy United Kingdom standards of consumer protection; and, thirdly, that it contains additives that are not allowed in cheese marketed in the United Kingdom.

Advise ABC Ltd as to its rights, if any, under European Union law.

Question 2 Evaluate the importance of the Keck case.

Question 3 Compare Article 36 TFEU (ex Article 30 EC) with the Cassis de Dijon mandatory requirements.

Advice on answering the questionsQuestion 1 Labelling in English: this is a product requirement, a MEQR contrary to Article 34 TFEU (ex Article 28 EC); Cassis indistinctly applicable/dual burden rule because it requires all cheese to be labelled in English (whether home produced or imported). It is a dual burden because ABC will have to have new labels affixed to the product. Possible justification on grounds of mandatory requirement of consumer protection; or possibly under Article 36 TFEU (ex Article 30 EC) public health grounds (it could be argued that customers need to know the ingredients, fat content etc. in case they have health problems). Conclusion probably justified.

Cubic containers: indistinctly applicable/dual burden measure; probably disproportionate and so not justified on consumer protection grounds. Labelling would be enough (cite Rau case).

Additives rule: again indistinctly applicable/dual burden content requirement, cite Cassis. Justified under Article 36 TFEU (ex Article 30 EC): cite Commission v Germany: burden of proof on the UK to prove its rules are in line with internationally accepted views or that it has scientific evidence of health risk. A good answer would also discuss the recent case law on the precautionary principle.

Question 2 You need in-depth knowledge of both pre- and post-Keck case law so that you can compare the Court’s approach. The importance of the change should be illustrated by comparing, for example, Cinéthèque, Buet, Oosthoek, with post-Keck cases on selling arrangements. Discuss the issue of the Court’s formalistic approach to the Keck test and critical commentary on this (Leclerc-Siplec). Finally discuss the refinement of the test (Gourmet) and whether this diminishes the importance of the test.

Question 3 Article 36 TFEU (ex Article 30 EC) is a closed list and applies to both discriminatory and indistinctly applicable measures. Cassis mandatory requirements is a developing list that moves with the times, but can only justify indistinctly applicable rules (Commission v Ireland (Souvenirs)). The main thing here would be to include plenty of case law examples and to demonstrate through those examples that the Court’s approach is basically the same: is there a legitimate objective? Is the rule necessary? Is it proportionate?


Reflect and review







Ready to move on


Need to study again

I can explain clearly the main European Union rules laid down in the Treaty, secondary legislation and case law, which govern the free movement of goods in the EU.

I can explain the position of goods entering the EU from non-Member States.

I can distinguish between illegal charges and legal taxes on goods moving between Member States by applying the relevant legal tests.

I can identify the circumstances in which it is legal for Member States to impose charges on goods in internal or external European Union trade.

I can explain the difference between similar and competing products under Article 110 TFEU (ex Article 90 EC) and the legal consequences when such products are taxed differently.

I can explain the extent to which Member States are allowed to use policy reasons to justify indirectly discriminatory tax regimes.

I can identify national rules which breach Article 34 or 35 TFEU (ex Article 28 or 29 EC)).

I can distinguish between discriminatory and ‘indistinctly applicable’ rules, and explain the differences in the way such rules are dealt with under EU law.

I can explain the concept of derogation under Article 36 TFEU (ex Article 30 EC), the Cassis ‘mandatory requirements’ and the principle of proportionality.

I can produce, and weigh the merits of, arguments in favour of, and against, the likelihood of derogation in any given circumstances in the light of a sound knowledge of the European Court’s approach.

I can distinguish between a ‘product requirement’ and a ‘selling arrangement’.

I can explain what type of ‘selling arrangement’ can be in breach of Article 34 TFEU (ex Article 28 EC).



Must revise

Revision done

10.1 The legal basis of the single market

10.2 Tariff barriers to trade within the EU

10.3 Article 110 TFEU (ex Article 90 EC) discriminatory taxation

10.4 Articles 34–36 TFEU (ex Articles 28–30 EC) quantitative restrictions

10.5 Harmonisation measures under Article 114 TFEU (ex Article 95 EC)


Notes

11 Competition policy

Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 196

11.1 A note on enforcement procedure up to 1 May 2004 . . . . . . . . . . . 197

11.2 Article 101 TFEU (ex Article 81 EC) . . . . . . . . . . . . . . . . . . . . 198

11.3 Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211

11.4 Article 102 TFEU (ex Article 82 EC) . . . . . . . . . . . . . . . . . . . . 215



Introduction

EU competition policy is one of the original policy areas of the 1957 EC Treaty and has a number of objectives, some of which are common to all competition systems and some particular to the EU. A key function of the EU competition rules, as interpreted by the Court of Justice, has been to help establish a single Union-wide market (for example by preventing companies from dividing the market into national sales territories).

In common with other competition systems, its aims are to promote economic efficiency, efficient allocation of resources and innovation.

Effective competition enhances ‘consumer welfare’ by protecting consumers from excessive prices, poor quality or limited choice of products. EU competition law has also focused on the need to protect small and medium-sized enterprises from being driven from the market by larger companies.

The primary competition law of the EU is set out in Articles 101–109 TFEU (ex Article 81–89 EC), and there is also a substantial amount of secondary legislation in the form of Regulations and Commission notices. Case law includes Commission decisions (as the Commission has, until recently, been the main enforcer of the rules) and judgments of the European courts in appeals from Commission decisions or rulings on preliminary references from national courts.

We will focus on Articles 101 and 102 TFEU (ex Articles 81 and 82 EC) which contain the rules that apply to companies (the remaining articles deal with public undertakings and state aids). In practice, EU competition policy is designed to achieve workable competition, not perfect competition. It is based on the idea that the European Union is a mixed economy, in which the market plays an essential, though not necessarily exclusive, role.

Section 11.2 deals with Article 101 TFEU (ex Article 81 EC), which is intended to catch anti-competitive agreements and collusion. The latter includes cartels through which companies agree to reduce competition between them by, for example, fixing prices or sharing out markets. There has recently been a major shift in the Commission’s approach to Article 101 TFEU (ex Article 81 EC).

Section 11.3 looks at the enforcement of the competition rules. Again this is an area where there has been a recent major shift towards a decentralised system, with greater involvement of national competition authorities and national courts.

Section 11.4 covers Article 102 TFEU (ex Article 82 EC), which is aimed at unilateral behaviour of ‘dominant companies’, whereby they abuse their power in the market to strengthen their own position. This covers both behaviour which affects the consumer directly, such as charging excessive prices, and behaviour which affects the competitive conditions or structure of the market to the disadvantage of competitors – such as undercutting your competitor’s prices to drive them out of the market.


explain the aims of EU competition policy

explain the respective aims of Articles 101 and 102 TFEU (ex Articles 81 and 82 EC)

define the concepts of undertaking, agreement and concerted practice

list the requirements for a breach of Article 101 TFEU (ex Article 81 EC) and explain how the Commission and Court of Justice have interpreted these requirements in the case law

apply the rules on agreements, concerted practices and decisions of associations to problem questions, and draw reasoned conclusions as to whether there is a breach of Article 101 TFEU (ex Article 81 EC)

EU Law 11 Competition policy page 197

explain the requirements for exemption under Article 101(3) TFEU (ex Article 81(3) EC) and under Commission Regulation 2790/99 on vertical restraints and advise on the availability of exemption for particular clauses in agreements

outline the respective roles and powers of the Commission, General Court (ex the CFI), Court of Justice, national competition authorities and national courts in the enforcement of EU competition law under Council Regulation 1/2003

explain the requirements for a breach of Article 102 TFEU (ex Article 82 EC)

explain the way in which the relevant market is defined for the purposes of EU competition law and apply this method to problem questions

explain the concept of dominance and the factors used to decide whether dominance exists

explain the concept of abuse and give examples of the type of conduct which, when carried out by a dominant undertaking, is considered to constitute abuse under Article 102 TFEU (ex Article 82 EC)

identify examples of abuse in problem questions, state and apply the relevant legal tests.

Essential reading Horspool and Humphreys, Chapter 14: ‘Competition law and policy’, pp.454–507.

Craig and De Búrca, Chapter 25: ‘Competition law: Article 81’; Chapter 26: ‘Competition law: Article 82’.

Articles 101 and 102 TFEU (ex Articles 81and 82 EC).

Judgments of the Court of Justice and CFI (now the General Court): http://curia.eu.int

Commission Competition Directorate website: http://europa.eu.int/comm/competition/index_en.html

Competition Commission (UK): www.competition-commission.gov.uk/

11.1 A note on enforcement procedure up to 1 May 2004

The enforcement of EU competition law was originally entrusted to the Commission, the powers and procedures of which were set out in Council Regulation 17/62. Those are the powers and procedures which applied in most of the cases covered by this guide.

However, that Regulation has been replaced by Council Regulation 1/2003 which applied from 1 May 2004 (see 11.3 below). To understand the case law prior to that date, the following key points about the enforcement process up to May 2004 may be helpful.

Notification/application for clearance

Companies were required to notify the Commission of their agreements and seek exemption for any potentially anti-competitive clauses. The Commission could:

grant ‘negative clearance’ to agreements which it decided did not infringe Article 101 TFEU (ex Article 81 EC)

grant exemption under Article 101 TFEU (ex Article 81(3) EC).

Both of the above were legally binding decisions, ensuring immunity from any fines, and could be challenged under Article 263 TFEU (ex Article 230 EC) (reviewable acts).

More often, because of pressure on resources, the Commission would send a ‘comfort letter’ without conducting a full investigation. This meant the Commission would not pursue the matter but it was not a legally binding decision and might, in theory, subsequently be overturned. It did not ensure immunity from fines.


Complaint or investigation

The Commission could also act on a complaint, for example from a competitor, or initiate its own investigations into areas of concern.

The Commission had extensive powers of investigation, including the power to conduct ‘dawn raids’! If it found a breach of the competition rules, it issued a ‘statement of objections’ to which the company(ies) could reply. They had the opportunity of responding to the Commission’s case at a hearing before a Hearing Officer. Before taking a decision on the case, the Commission was required to consult an Advisory Committee made up of representatives of the competition authorities of the Member States. If the Commission decided that there had been an infringement of the competition rules, it could impose very substantial fines. The company(ies) can seek judicial review of the Commission’s decision. The Court of Justice originally heard judicial review actions against decisions of the Commission implementing Articles 101 and 102 TFEU (ex Article 81 and 82 EC) but the CFI (now known as the General Court) has had this jurisdiction since 1989. Appeal from the General Court (CFI) to the Court of Justice is available on a point of law only.

Direct effect

Articles 101(1) and Article 102 TFEU (ex Articles 81(1) and Article 82 EC) have direct effect, but, before May 2004, Article 101(3) TFEU (ex Article 81(3) EC) – the power to grant exemption – did not have direct effect and was the exclusive prerogative of the Commission under Regulation 17/62.

11.2 Article 101 TFEU (ex Article 81 EC)

Essential reading Horspool and Humphreys, Chapter 14: ‘Competition law and policy’, sections

14.6–14.11, pp.476–479.

Craig and de Búrca, Chapter 25: ‘Competition Law: Article 81’.

11.2.1 Content and structure of Article 101 TFEU (ex Article 81 EC)This article regulates anti-competitive behaviour in a wide range of scenarios and has been applied with reference to what the EU is trying to achieve: a level playing-field for competition within an internal market. The aim of achieving market integration between the Member States is apparent in many rulings of the Commission and European courts.

Text of Article 101 TFEU (ex Article 81 EC)

1. The following shall be prohibited as incompatible with the internal market: all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the common market, and in particular those which:

a. directly or indirectly fix purchase or selling prices or any other trading conditions

b. limit or control production, markets, technical development, or investment

c. share markets or sources of supply

d. apply dissimilar conditions to equivalent transactions with other trading practices, thereby placing them at a competitive disadvantage

e. make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.

2. Any agreements or decisions prohibited pursuant to this Article shall be automatically void.


3. The provisions of paragraph 1 may, however, be declared inapplicable in the case of:

– any agreement or category of agreements between undertakings

– any decision or category of decisions by associations of undertakings

– any concerted practice or category of concerted practices

which contributes to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit, and which does not:

a. impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objectives;

b. afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question.

The structure of Article 101 TFEU (ex Article 81 EC)

There are three requirements to prove a violation of Article 101 TFEU (ex Article 81(1) EC).

1. Agreement/collusion between undertakings or decision of association of undertakings.

2. An effect on trade between Member States.

3. The agreement/collusion has the object of preventing, restricting or distorting competition within the internal market, to an appreciable extent.

Article 101 TFEU (ex Article 81(2) EC)

Agreements which breach Article 101 TFEU (ex Article 81(1) EC) are void (see below) unless they can be exempted under Article 101 TFEU (ex Article 81(3) EC).

Article 101 TFEU (ex Article 81(3) EC)

This lays down conditions for exemption from Article 101 TFEU (ex Article 81(1) EC).

We will examine the way in which the Court of Justice has interpreted these concepts and requirements.

11.2.2 UndertakingsThe concept of undertaking encompasses every entity engaged in an economic activity regardless of the legal status of the entity and the way in which is it financed.(C-41/90 Höfner and Elser [1991] ECR I-1979).

This means that any entity carrying on a commercial or economic activity (company, partnership, sole trader, cooperative) is subject to the competition rules.

The EU courts have, however, made it clear that state bodies which purchase goods for use in the public health systems of the Member States are not undertakings and therefore not subject to actions under Articles 101 TFEU (ex Article 81 and 82 EC), when they purchase goods from public funds for use in the national health systems, where patients are treated under social welfare provision. In C-205/03 P FENIN [2006] ECR I-6295 the Court of Justice clarified that the purchasing of goods is not an economic activity (according to the definition in Höfner and Elser) when the goods are not offered for resale but used to perform a public function. The Court of Justice stated that ‘it is the activity consisting in offering goods and services on a given market that is the characteristic feature of an economic activity’.

Treatment of corporate groups

Parents and subsidiaries within the same corporate group are regarded as a ‘single undertaking’:

Article 85 [101 TFEU (ex Article 81 EC)] is not concerned with agreements or concerted practices between undertakings belonging to the same concern and having the status of parent company and subsidiary, if the undertakings form an economic unit within which


the subsidiary has no real freedom to determine its course of action on the market, and if the agreements or practices are concerned merely with the internal allocation of tasks as between the undertakings. (15/74 Centrafarm v Sterling Drug [1974] ECR 1147, [1974] 2 CMLR 500, paragraph 41).

Article 101 TFEU (ex Article 81 EC) requires one of the following:

agreement between undertakings

decision of an association of undertakings

concerted practice between undertakings.

11.2.3 Meaning of the term ‘agreement’


14.12–14.17, pp.479–482.

This concept has been given a wide and flexible interpretation. In Case C-56 and 58/64 Consten and Grundig v Commission [1966] ECR 299, [1996] CMLR 418, it was argued that it should apply only to agreements between companies operating at the same level in the chain of production/distribution (‘horizontal agreements’), for example, between competing manufacturers of televisions. The Court of Justice saw no reason to limit its scope in this way and held that it also applies to ‘vertical agreements’, that is, those between parties operating at different levels, for example, between a manufacturer of televisions and its distributor.

There is no requirement for a written or legally enforceable contract. An informal ‘gentlemen’s agreement’ is covered so companies cannot evade Article 101 TFEU (ex Article 81 EC) by, for example, agreeing things orally! See: Case 41, 44 and 45/69 ACF Chemiefarma NV v Commission (Quinine cartel) [1970] ECR 661.

An agreement need not necessarily be a ‘one-off’ event. It can be the result of a process lasting years. In Polypropylene [1988] 4 CMLR 347, upheld on appeal in C-51-92 Hercules Chemicals v Commission, [1999] ECR I-4235, [1999] 5 CMLR 976, the dealings of a cartel in the petrochemicals sector were held to form part of a single, overall agreement. All 15 firms involved were part of this agreement, even those that had not attended every meeting of the cartel. On the burden of proof, see Case C-49/92 Commission v Anic Partecipazioni [1999] ECR I-4125: the Commission had established that an agreement had been concluded at a meeting; it was held that the burden of proof was then on the undertaking concerned to prove that it did not intend to participate in the implementation of the agreement.

Can a unilateral act be a ‘tacit agreement’?

This issue commonly arises where a manufacturer imposes anti-competitive terms on its distributors: can they be said to have ‘agreed’ to the terms simply by continuing to deal with that manufacturer? Basically, yes, if they have acquiesced and continued to deal with the manufacturer: see Commission Decision IV/35.733 Volkswagen; upheld in T-62/98 Volkswagen v Commission [2000] ECR II-2707 [2000], 5 CMLR 853.

But this is not the case if there is no ‘common interest’ between the manufacturer and its distributors and the latter have done their utmost to avoid complying, as in the important recent case of Bayer (Commission Decision 96/478 Bayer/Adalat OJ 1996 L201/1, [1996] 5 CMLR 416; annulled by the CFI (now known as the General Court) in T-41/96 Bayer v Commission [2000] ECR II-3383, [2001] 4 CMLR 176; appeal to the Court of Justice dismissed in C-2/01 and C-3/01 [2004] ECR I-23). Bayer had reduced its supplies of the drug Adalat to French and Spanish wholesalers who were re-exporting the drugs (‘parallel imports’) to the UK where prices were at least 40 per cent higher. Bayer wanted to keep these markets separate so that it could maintain the higher price level in the UK. The Commission decided that there was an agreement between the wholesalers and Bayer not to export to the UK, even though there was evidence that the wholesalers had in fact done their utmost to obtain supplies for re-export to


‘get round’ the restrictions imposed by Bayer. The CFI (General Court) annulled the Commission’s Decision against Bayer on the grounds that it had not established that there was an agreement. Approving that judgment, the Court of Justice held that:

the mere fact that a measure adopted by the manufacturer, which has the object or effect of restricting competition, falls within the context of continuous business relations between the manufacturers and its wholesalers, is not sufficient for a finding that such an agreement exists.

Unilateral behaviour will, therefore, not suffice to create an agreement under Article 101 TFEU (ex Article 81(1) EC) unless there is at least tacit acquiescence, a ‘concurrence of wills’ on the part of both parties. The Court of Justice made clear in Bayer that Article 101 TFEU (ex Article 81(1) EC) requires consensus between the parties.

Self-assessment questions 1. Is a body purchasing medical supplies on behalf of the National Health Service

subject to the competition rules?

2. Can an agreement between a parent company and its subsidiary breach Article 101 TFEU (ex Article 81 EC)?

3. Does the agreement have to be legally enforceable?

Activity 11.1How do the following agreements restrict ‘inter-brand’ or ‘intra-brand’ competition? Are they ‘horizontal’ or ‘vertical’ agreements?

a. Between A, a manufacturer of cosmetics, and B, its UK distributor, that B will only supply outlets in England and Wales.

b. Between A and C, both cosmetics manufacturers, to concentrate their promotional activities in different Member States.

c. Between D and E, distributors of Volvo cars in France and Germany respectively, not to supply customers from each other’s territory.

11.2.4 Decisions by associations of undertakingsThis can include decisions, recommendations and codes of practice of trade associations or professional bodies even if they are not formally binding on the members, where it is shown that members have tended to comply with them: see case IAZ International v Commission [1983] ECR 3369, [1984] 3 CMLR 276.

The Commission has also considered restrictive rules of professional bodies. In Spanish Association of Industrial Property Agents (COAPI) OJ [1995] L122/37, [1995] 5 CMLR 468, the setting of prices for patent renewal services was a breach of Article 101 TFEU (ex Article 81 EC) because it restricted competition between patent agents. The Commission did not impose a fine because this was its first decision against a professional body under Article 101 TFEU (ex Article 81 EC).

In Case C-309/99 Wouters [2002] ECR I-1577, [2002] 4 CMLR 27, the Court held that individual members of the Dutch bar association were ‘undertakings’ and that the bar association was an ‘association of undertakings’. Its rule preventing lawyers from entering partnerships with other professionals, such as accountants, was therefore capable of breaching Article 101 TFEU (ex Article 81(1) EC), but the Court said it would only do so if it went ‘beyond what was necessary in order to ensure the proper practice of the legal profession’ (paragraph 9 of the judgment). It held that it did not.

This is an example of the Court applying a ‘rule of reason’ approach to Article 101(1) TFEU (ex Article 81(1) EC) – see 11.2.7 below.

Article 101 TFEU (ex Article 81 EC) can also cover decisions of ‘associations of associations’, as in the Cement case involving the European Cement Association (Cembureau) whose members were the national associations of the Member States of the EU and EFTA: Decision 94/815 Cement, OJ [1994] L343/1.


11.2.5 Concerted practice


14.18–14.27, pp.482–486.

Craig and de Búrca, Chapter 25: ‘Competition law: Article 81’, pp.957–963.

Of all restrictions of competition, restrictive practices in the form of secret agreements are undoubtedly the most destructive. (28th Report on Competition Policy, DGIV, 1998, paragraph 64)

Businessmen and women engaged in anti-competitive practices know better than to advertise the fact by entering formal agreements and, as we have seen, the interpretation of the concept of agreement has gone some way to tackling that problem by including informal and oral agreements. The concept of ‘concerted practice’ extends the scope of Article 101 TFEU (ex Article 81 EC) still further. It was defined in the Dyestuffs case (48/69 ICI v Commission (Dyestuffs) [1972] ECR 619, [1972] CMLR 557, paragraph 64), as:

a form of co-ordination between undertakings which, without having reached the stage where an agreement properly so called has been concluded, knowingly substitutes practical co-operation between them for the risks of competition.

An oligopoly market is one in which there is a small number of producers/suppliers, which it is very difficult for any new producer to enter and which, according to economic theory, leads to ‘interdependence’ between the members of the oligopoly. According to this theory there is little point in trying to increase market share by lowering prices since the other members will promptly respond by lowering their prices too, depressing profits all round. On the other hand, an independent price rise runs the risk of customers switching to one of the other suppliers. The result, it is argued, is a practice of ‘price following’ in which, as soon as the ‘price leader’ raises its prices, the others immediately follow suit, enabling them all to retain their existing market shares but at a more profitable price. In this scenario, simultaneous price increases are not evidence of collusion by the companies, but merely a rational response to the market structure (‘conscious parallelism’).

The dyestuffs market in the EU had remained ‘compartmentalised’ along national lines, with differing price levels in different Member States, despite 10 years of supposed free movement of goods. It could have been expected that this would lead to movement of dyestuffs from lower-price states to higher-price states and a gradual erosion of price differences, but this had not happened. There was also evidence of meetings between the companies concerned, telexes with similar wording, and three instances of simultaneous price increases being introduced. The Court of Justice upheld the Commission’s finding that this was a case of concerted practice. The companies’ argument that the simultaneous price rises were the result of rational ‘price following’ in an oligopolistic market was rejected by the Court, which found that a market with 11 manufacturers did not constitute an oligopoly.

Another important early case in which the Court of Justice refined the definition of concerted practice was Case 40/73 Suiker Unie (Sugar Cartel) [1975] ECR 1663, [1976] 1 CMLR 295. The Commission had decided that a number of sugar producers had engaged in ‘concerted practices’. The producers appealed, arguing that there was no actual plan to restrict competition. The Court of Justice held that it was not necessary to prove that there was an actual plan, since Article 101 TFEU (ex Article 81 EC) strictly precludes:

any direct or indirect contact…the object or effect whereof is either to influence the conduct on the market of an actual or potential competitor or to disclose to such a competitor the course of conduct which they themselves have decided to adopt…on the market.

All that is required, therefore, is some contact between the companies concerned, and some conscious cooperation.

Go to your study pack and read paragraphs 64-113 of the extract from Case 48/69 ICI v Commission of the European Communities.


The oligopoly argument which failed in Dyestuffs was accepted as a defence in Case C-89 etc /85 Re Woodpulp (Ahlstrom Oy v Commission) [1994] ECR I-99, [1993] 4 CMLR 407. The only evidence the Commission could rely on to support its finding of concerted practice between woodpulp producers was that of simultaneous price increases, despite the fact that the producers were based in different parts of the world. (There had been some other evidence but it was declared inadmissible.) The Court annulled the Commission decision, holding that the parallel price rises could be evidence of collusion, but proof was required beyond reasonable doubt. Parallel behaviour would only amount to proof of concerted practice if there was no plausible alternative explanation. Price following in an oligopoly market did constitute a plausible alternative explanation in this case and so was a valid defence.

Exchanging commercially useful or sensitive information can, in itself, amount to concerted practice where it enables competitors to see what strategy other competitors are pursuing and respond accordingly: see Re the UK Agricultural Tractor Registration Exchange [1993] 4 CMLR 358 and Decision 1999/210 Tate and Lyle/British Sugar/Napier Brown/James Budgett [1999] 4 CMLR 1316. (Mainly upheld on appeal T-202, 204 and 207/98 Tate & Lyle, British Sugar and Napier Brown v Commission, [2001] ECR II-2035.)

In this case, a number of companies attended a meeting with an anti-competitive purpose. The fact that only one of the companies present (British Sugar) gave information on its future prices did not prevent there being a prohibited agreement or concerted practice between undertakings for the purposes of Article 101 TFEU (ex Article 81 EC).

This case confirms the ‘joint classification’ approach, confirming that it is not necessary for the Commission to characterise an infringement of Article 101 TFEU (ex Article 81(1) EC) as exclusively an agreement or a concerted practice. In a long, complex infringement it is often difficult to make a clear distinction.

The CFI (now the General Court) upheld the Commission’s view that the purpose of those meetings was to restrict competition by the coordination of pricing policies. The other participants were intending to eliminate uncertainty about the future conduct of their competitors and would not fail to take account of the information they received at the meeting about future prices.

It is not necessary for the Commission to prove the actual effects of the concerted practice on the market. See also on this point Case C-199/92P Huls AG v Commission [1999] ECR I-4287.

Because of the problems of uncovering secret cartel activity, the Commission† has sought to provide an incentive to members of such cartels to ‘blow the whistle’ on the others by promising them immunity from fines (see Notice on Immunity from Fines and Reduction of Fines in Cartel Cases (the ‘Leniency Notice’) OJ C-298 of 8 December 2006)

Self-assessment questions 1. Explain/define the following terms:

undertaking

agreement

concerted practice.

2. Give examples of the kind of conduct that amounts to ‘concerted practice’. What evidence of concerted practice was found in the ICI (Dyestuffs) case?

3. What is meant by an oligopoly? Was the relevant market found to be an oligopoly in Dyestuffs? Why did the companies involved seek to argue that it was?

4. What evidence did the Commission rely on in Woodpulp (Ahlstrom v Commission), to prove the existence of concerted practice? Why did the Court of Justice consider it insufficient?

5. In what circumstances will the exchange of information among competitors amount to a concerted practice? How does it restrict competition?

6. Is a barrister subject to the competition rules?

Go to your study pack and read paragraphs 126-7 of the extract from A Ahlstom and Others v Commission of the European Communities; Joined Cases 89, 104, 116-117, 125-129/85

† In a Commission decision, involving a duopoly which had engaged in information exchange, price-fixing and market sharing, one party to the cartel was granted 100 per cent remission of fines for whistle-blowing and the other 40 per cent for mitigating factors: see COMP/E-2/37.978 Re the Methylglucamine Cartel [2004] 4 CMLR 30.


Activity 11.2Consider whether the conduct of Coras, Rolax and Seiky may infringe Article 101 TFEU (ex Article 81 EC) in the following circumstances and what the Commission would have to prove.

At a recent conference of the European Watchmakers Association, Rolax’s regional sales manager for Southern Europe informed members of Rolax’s plans to concentrate its sales efforts on the Italian market this year. The representative from Coras Watches announced plans to target the Spanish and Portuguese markets. Members discussed the recent increases in the cost of precious metals. Shortly after the conference, the list prices of Coras, Rolax and Seiky, the other major luxury watchmaker also at the conference, were all increased by five per cent.

11.2.6 Effect on trade between Member States: the Commission’s jurisdictionThis is a jurisdictional requirement: if the agreement (etc.) does not affect trade between Member States then it will be covered by the relevant national competition rules and will not infringe European Union competition law. It does not matter whether the effect is positive or negative: see C-56 and 58/64 Consten and Grundig v Commission [1966] ECR 299, [1966] CMLR 418.

A potential effect is enough, and the Commission usually has little difficulty in showing this. The test was laid down in Case 56/65 STM v Maschinenbau Ulm [1966] ECR 235:

‘it must be possible to foresee with a sufficient degree of probability on the basis of a set of objective factors of law or of fact that the agreement in question may have an influence, direct or indirect, actual or potential, on the pattern of trade between Member States’.

Even if the parties are all within one Member State, there is likely to be an effect on trade between Member States where the arrangement makes it more difficult for companies from other Member States to penetrate the market: see Case 8/72 Cementhandelaren v Commission [1972] ECR 977, [1973] CMLR 7.

See also the Commission Notice: Guidelines on the effect on trade concept contained in Articles 81 and 82 of the Treaty (2004/C 101/07).

Extra-territorial jurisdiction

The Commission has jurisdiction over companies located outside the EU provided that the agreement/concerted practice/decision has been implemented in the EU: see 89 etc /85 Ahlstrom Oy v Commission (the Woodpulp case) [1994] ECR I-99, [1988] 4 CMLR 901 (paragraphs 12–23) judgment of Court of Justice on extra territorial jurisdiction:

...infringement of Art. 85 [now Article 101 TFEU] consists of two elements, the formation of the agreement… and the implementation thereof. If the application (of Art. 85) were made to depend on the place where the agreement… was formed, the result would obviously be to give undertakings an easy means of evading those prohibitions. The decisive factor is therefore the place where it is implemented.

Activity 11.3Consider whether, and on what grounds, the EU Commission can claim to have jurisdiction to examine the following (hypothetical) agreements.

a. A joint-venture between two German firms to develop a voice-activated device for inputting data into computers.

b. An agreement between three Japanese camera manufacturers to fix minimum prices when selling their goods to importers in the EU.

c. An agreement between a subsidiary of a US firm and a German firm not to trespass on each others’ sales territories in the EU. Could the US firm itself be liable if the agreement is found to breach Article 101 TFEU (ex Article 81 EC)?


11.2.7 ‘Object or effect of preventing, restricting or distorting competition’


14.28–14.43, pp.486–493.


Is analysis of the economic effects necessary?

There is no need to decide between the terms ‘prevention, restriction or distortion’ of competition. Much more debate has focused on whether it is enough to show an anti-competitive ‘object’ or whether an anti-competitive effect on the market must be shown. Disagreeing with the Advocate General, who argued that economic analysis of the effects on the ground should precede any finding of a breach of Article 101 TFEU (ex Article 81 EC), the Court held in Consten and Grundig, that the ‘or’ means that these requirements are alternative, not cumulative. Where an obvious anti-competitive object can be deduced from the clauses of the agreement itself (e.g. grant of absolute exclusive sales territory, clauses prohibiting exports, fixing minimum prices or sharing markets), there is no need to examine its actual effect on the market: it is by its nature (per se) illegal.

This can be contrasted with less clear-cut situations, where there is some restriction on the conduct of the parties, but where the Court has required analysis of the effects of the agreement in its legal and economic context before deciding whether it has anti-competitive effects. Although a potential effect is sufficient, there must be ‘a degree of probability which is objectively grounded in fact and law’ (see 53/65 STM v Maschinenbau Ulm [1966] ECR 235, [1966] CMLR 357).

Granting an exclusive territory to enable a distributor to enter a new area, but with no prohibition on exports, was held not to breach Article 101 TFEU (ex Article 81(1) EC) as it did not have anti-competitive effects.

Activity 11.4 Read Joined Cases 56 and 58/64 Consten and Grundig v Commission [1966] ECR 299 and write answers to the following questions:

a. What is the difference between inter-brand and intra-brand competition? Which of these does Article 101 TFEU (ex Article 81 EC) apply to?

b. What is the difference between a ‘vertical’ agreement and a ‘horizontal’ agreement? To which of these does Article 101 TFEU (ex Article 81 EC) apply?

c. What is the purpose of the requirement that an agreement must ‘affect trade between Member States’? Is it necessary to show a negative effect on trade?

d. For an infringement of Article 101 TFEU (ex Article 81 EC), is it enough to show an anti-competitive object or purpose, or is it necessary to prove that the agreement has had the effect of restricting competition on the market? (See also Case 56/65 STM v Maschinenbau [1966] ECR 235.)

e. What aspect(s) of the agreement between Consten and Grundig were held to breach Article 101 TFEU (ex Article 81 EC)?

f. Which of the aims of competition law seems to be uppermost in the Court’s reasoning?

g. If some clauses breach Article 101 TFEU (ex Article 81 EC), is the whole agreement void or only those particular clauses?

No feedback provided: the answers can all be found in the Court of Justice’s judgment.

Go to your study pack and read the extract from Établissements Consten S.à.R.L. and Grundig-Verkaufs-GmbH v Commission of the European Economic Community; Joined Cases 56 and 58/64.


Parallel traders

The Consten and Grundig case illustrates the activities of the ‘parallel trader’. One of the means of achieving the integration of the market and the reduction or elimination of price differentials between Member States is through the activities of the ‘parallel importer’. This is the undertaking which perceives a difference in price between two areas and therefore imports goods across the price divide, to undercut sellers in the higher-priced market, driving prices down for the consumers. This is the positive side of such activities. From the other point of view, the distributor allocated a territory into which he/she has introduced a new product, may well have incurred costs in establishing the brand (increasing competition between brands, inter-brand competition, as in, Consten and Grundig); such undertakings will have little incentive to bear these costs if they can subsequently be undercut by the ‘free rider’ importing goods and selling them more cheaply.

Other cases where the Court has said that an agreement must be examined in its economic context before deciding whether a restriction on conduct actually results in a restriction of competition include those involving exclusive purchasing agreements (such as pubs which agree to buy all their beer from one brewer, or petrol stations supplied by one oil company). These will only harm competition if so many outlets are ‘tied’ to particular suppliers that it is virtually impossible for new suppliers to enter the market. Some cases in which economic analysis of the effects of the agreement has been required by the Court of Justice include 23/67 Brasserie de Haecht v Wilkin [1967] ECR 407; 258/78 Nungesser [1982] ECR 2015; 161/84 Pronuptia [1986] ECR 353 (franchise agreement); C-234/89 Delimitis v Henninger Brau [1991] ECR l-935.

Many commentators have long argued (see, for example, in Korah, V. An Introductory Guide to EC Competition Law and Practice (Oxford: Hart Publishing, 2006) third edition [ISBN 9781841137544]) that the Commission has paid insufficient heed to this aspect of the Court’s approach to the actual economic consequences of agreements and that it has treated any restriction on commercial conduct as a breach of Article 101 TFEU (ex Article 81 EC).

The Commission’s broad interpretation of Article 101 TFEU (ex Article 81 EC) meant that a vast array of ordinary commercial agreements (such as franchises, exclusive purchase/supply or distribution agreements) were prima facie illegal under European Union law because it is in the nature of such agreements that they restrict the parties’ freedom in some way. In the real world, however, business cannot function without such agreements (e.g. Grundig would probably not have been able to enter the French market at all if it had not been able to appoint Consten as its exclusive distributor to promote and distribute its products. The effect was actually to increase competition on the French market for TVs, hi-fis etc.).

To deal with the large numbers of notifications for exemption for such agreements, the Commission used its power to adopt ‘block exemption’† regulations (see Section 11.2.10 below) for particular categories of agreement, setting out the clauses that were ‘permitted’ and those which were ‘prohibited’.

This at least provided legal certainty in that companies which wrote their agreements to comply with the relevant regulation could be sure of avoiding fines. It also gave the Commission centralised control over what was allowed, but there was much criticism of the ‘straightjacket effect’ of these block exemptions.

Thus, under Article 101 TFEU (ex Article 81 EC), there is first a finding of infringement under Article 101 TFEU (ex Article 81(1) EC). The weighing of the pro- and anti-competitive effects of an agreement only takes place under Article 101 TFEU (ex Article 81(3) EC) which allows exemption for agreements which produce positive effects. This two-stage process under Article 101 TFEU (ex Article 81 EC) can be contrasted with the US ‘rule of reason’ approach which balances the pro- and anti-competitive consequences of an agreement before a finding of infringement is made. The CFI (now the General Court) confirmed the two-stage approach and rejected the ‘rule of reason’ in Case T-112/99 Metropole Television (M6) and Others v Commission [2001] ECR II-2459.

Go to your study pack and read the extract from Case 234/89 Delimitis v Henninger Brau, paragraphs 14-27; Case 258/78 LC Nungesser KG and Eisle v Commission, paragraphs 44, 53-61 and 76-78 and Case 161/84 Pronuptia de Paris v Schillgallis, paragraphs 72-77.

† Following a lengthy consultation exercise, the Commission has moved towards a more economics-based approach, replacing the rigid old-style block exemptions with more flexible ones in 2000 (see 11.2.10 below).

Go to your study pack and read paragraphs 74–77 of the extract from Case T-112/99 Metropole Television (M6) and Others v Commission.


Examples of anti-competitive agreements and terms:

Horizontal: two or more undertakings, at the same level of supply or distribution, fix prices, agree to limit production, share markets, engage in collusive tendering (see cases under concerted practice, above).

Vertical: involving undertakings at different levels of supply/distribution.

The Commission has also reaffirmed the two-stage approach in its new Notice Guidelines on the application of Article 81(3) of the Treaty (2004/C 101/08, 27.4.2004):

The assessment under Article 81 [Article 101TFEU] thus consists of two parts. The first step is to assess whether an agreement between undertakings, which is capable of affecting trade between Member States, has an anti-competitive object or actual or potential anti-competitive effects. The second step, which only becomes relevant when an agreement is found to be restrictive of competition, is to determine the pro-competitive benefits produced by that agreement and to assess whether these pro-competitive effects outweigh the anti-competitive effects. The balancing of anti-competitive and pro-competitive effects is conducted exclusively within the framework laid down by Article 81(3) [Article 101(3) TFEU] (paragraph 11 of Notice).

Selective distribution

Selective distribution restricts supply to those re-sellers which meet certain criteria. It restricts intra-brand competition. The Court has held, in Case 26/76 Metro v Commission [1977] ECR 1875, [1978] 2 CMLR 1 (in this instance applying a ‘rule of reason’ approach), that a selective distribution system falls outside the scope of Article 101 TFEU (ex Article 81(1) EC) provided that the selection of outlets:

1. is justified by the nature of the product

2. the criteria for selection are objective, qualitative and proportionate, and

3. are applied in a non-discriminatory way to all potential applicants wishing to join the selective distribution network.

For another example of the ‘rule of reason’ approach, see Case C-309/99 Wouters [2002] ECR I-1577, [2002] 4 CMLR 27, above.

Guidance from the Commission

In its Guidelines on the application of Article 81(3) (above), the Commission has formulated two questions (and guidance on how to answer them) for assessing whether an agreement (etc) infringes Article 101 TFEU (ex Article 81 EC). See paragraph 18(1) in relation to restrictions on inter-brand competition:

Does the agreement restrict actual or potential competition that would have existed without the agreement? If so, the agreement may be caught by Article 81(1)… [emphasis added].

and paragraph 18(2) in relation to intra-brand competition:

Does the agreement restrict actual or potential competition that would have existed in the absence of the contractual restraint(s)? If so, the agreement may be caught by Article 81(1)… [emphasis added].

These tests, in particular the emphasised parts, reflect the Commission’s new (ex ante) approach of considering agreements in their actual economic and legal context before finding a restriction of competition under Article 101 TFEU (ex Article 81(1) EC).

Self-assessment questions 1. If the agreement is between companies based in the same Member State, can

there be an ‘effect on trade between Member States’?

2. Can the Commission impose fines under EU competition law on companies based outside the EU?

3. For a breach of Article 101 TFEU (ex Article 81 EC), is it necessary to show that the agreement/concerted practice has an anti-competitive effect on the market?

Go to your study pack and read the ‘operative’ section of the extract from Case 26/76 Metro v Commission.


4. What is the difference between vertical and horizontal restraints? Give a couple of examples of each.

5. What do you understand by the ‘rule of reason’ approach? Is this the approach used by the Commission when applying Article 101 TFEU (ex Article 81 EC)?

6. The French company, Yves St Laurent, manufactures perfumes for the luxury market. Shops wishing to sell its products must fulfil certain conditions designed to protect the luxury ‘brand image’. For this ‘selective distribution’ to be legal under the Metro rules, what would Yves St Laurent have to show?

Activity 11.5Would the following terms infringe Article 101 TFEU (ex Article 81(1) EC)? If so, are they vertical or horizontal restraints?

a. Washco, a German washing-machine manufacturer, agrees with its distributors in France, Italy and the UK that the one-year parts and labour warranty can only be redeemed in the country where the washing machine was bought.

b. Motorco’s agreement with its distributors in Spain provides for five per cent commission on each vehicle sold in Spain. This commission is not payable for sales to customers outside Spain as Motorco has appointed distributors in other Member States.

11.2.8 Appreciable effect: the de minimis ruleThis rule is not contained in the text of Article 101 TFEU (ex Article 81 EC) but was established by the Court in Case 5/69 Volk [1969] ECR 295. It means that certain breaches of Article 101 TFEU (ex Article 81 EC) will be disregarded if the companies involved are relatively small and the effect of their activities on the overall competitive situation on the market is negligible. The Commission formulated the precise circumstances in which it would regard a breach as ‘de minimis’ in a Notice (although this is not binding on the Court of Justice). The Notice has been re-issued several times with changing thresholds. The current version is: Commission Notice on Agreements of Minor Importance [2001] OJ C 368/13.

In the past, the Notice took into account turnover of the companies as well as market share. In the new Notice, whether an agreement/concerted practice etc. is ‘appreciable’ depends solely on the market shares of the undertakings involved. Paragraph 9 provides that agreements concerning goods or services will not fall within Article 101 TFEU (ex Article 81(1) EC) if the market share of all the participating undertakings on the relevant market does not exceed:

the 10 per cent threshold, where the agreement is made between undertakings operating at the same level of production or of marketing (horizontal agreements)

the 15 per cent threshold, where the agreement is made between undertakings operating at different economic levels (vertical agreements).

In the case of a mixed horizontal/vertical agreement or where it is difficult to classify the agreement as either horizontal or vertical, the 10 per cent threshold applies.

The new Notice also includes a new de minimis market share threshold for markets where parallel networks of similar agreements established by several manufacturers or dealers exist, such as in the beer and petrol sectors. These agreements were excluded from the benefit of a de minimis threshold under the old Notice.

The Notice sets out the hard-core restrictions† which are always prohibited and which, if included in the agreement, will make the application of the de minimis rule invalid. These are agreements to do such things as fix prices or to share out markets without the possibility of passive sales being permitted.

The Notice also states that agreements between small and medium-sized enterprises (SMEs) are in general de minimis and are rarely capable of appreciably affecting intra-Union trade.

† The hard-core restrictions which are prohibited under the Notice and will stop the de minimis market thresholds from giving protection are:a. for vertical agreements – those set out in Block Exemption 2790/1999 (see below).b. for horizontal agreements – those set out in Article 5 of Block Exemption 2658/2000 for specialisation agreements, that is, those which ‘directly or indirectly, in isolation or in combination with other factors under the control of the parties, have as their object:– the fixing of prices when selling the products to third parties– the limitation of output or sales– the allocation of markets or customers’.


Where companies assume in good faith that they are covered by the Notice, the Commission will not impose fines (OJ C-368 22 December 2001). The Notice can be found at: http://europa.eu.int/comm/competition/antitrust/deminimis/ and is included in Foster’s EU Treaties and Legislation.

11.2.9 Article 101(2) TFEU (ex Article 81(2) EC)The legal consequence of a breach of Article 101 TFEU(1) (ex Article 81(1) EC) (in addition to liability for fines) is that the agreement is void and unenforceable prospectively and retrospectively. A considerable part of the case law has arisen because one party to an agreement no longer wishes to be bound by it and so argues that it breaches Article 101 TFEU (ex Article 81 EC) and is unenforceable.

In Consten and Grundig, the Court held that the whole agreement is not necessarily void. If the offending clauses can be deleted (severed) and what remains is still a viable agreement for the parties, then the remainder is valid. Whether a clause is severable or not is a question of national law.

11.2.10 Exemption under Article 101 TFEU(3) (ex Article 81(3) EC)


14.44–14.51, pp.493–497.


Individual exemption†

Under Article 101(3) TFEU (ex Article 81(3) EC) there is the possibility of exemption for agreements, decisions or concerted practices which infringe Article 101 TFEU(1) (ex Article 81(1) EC) as long as they meet all four of the requirements set out in Article 101 TFEU (ex Article 81(3) EC). There are two ‘positive’ and two ‘negative’ requirements:

Positive requirements

1. It contributes to improving the production or distribution of goods or to promoting technical or economic progress.

2. Consumers receive a fair share of the resulting benefit (it does not just make bigger profits for the companies concerned with no benefit to customers).

Negative requirements

1. The restriction on competition must be indispensable for the achievement of the improvement or progress claimed in (1) above. (That is, there must be a causal link between the restriction on competition and the improvement gained).

2. It must not put the parties in a position to eliminate competition ‘in respect of a substantial part of the products in question’.

Under the original Regulation governing the enforcement of the competition rules, Regulation 17/62, only the Commission could grant exemptions and undertakings had to ‘notify’ their agreements for exemption. In 1999 the Commission published a White Paper on Modernisation of the Rules implementing Articles 81 and 82 of the EC Treaty (now Articles 101 and 102 TFEU). It included a proposal that national authorities and national courts should be able to grant exemptions under Article 81(3) EC (now Article 101(3) TFEU). Based on the White Paper, a new system of enforcement has applied since 1 May 2004, under Regulation 1/2003.

Under this new regime, the requirement for prior notification has been abolished and Article 101 TFEU (ex Article 81(3) EC) is now directly effective, meaning that a national competition authority, court or tribunal can grant individual exemptions (see 11.3 below).

† Change in the law on exemption under Article101 TFEU (ex Article 81(3) EC). Until May 2004 the Commission had exclusive power to grant exemptions, after prior notification by the parties to the agreement (Article 4(1) and 9(1) of Reg. 17/62).


Block exemption for vertical agreements: Regulation 2790/99

Another way of reducing the need for individual exemptions is the use of ‘block exemptions’ for specific categories of agreement, such as those for exclusive distribution agreements, exclusive purchasing agreements and franchise agreements. These take the form of regulations and have legal force. The ‘old style’ Regulations set out permissible and prohibited clauses in the specified type of vertical agreement.†

An agreement drawn up in line with the requirements of a block exemption is automatically exempt from Article 101 TFEU (ex Article 81 EC). Following criticism of the straightjacket effect of the old-style Regulations, the Commission launched a consultation exercise which has led to far-reaching reform. The most important outcome of this reassessment of the application of the competition rules is the block exemption on vertical agreements and concerted practices, Regulation 2790/99. It replaces the separate block exemptions for different types of vertical agreement and covers all types of vertical restraints, including selective distribution agreements which were not previously covered by a block exemption. It applies to all vertical agreements covering both services and goods, and to goods supplied both for resale and for use.

It represents a more market-orientated, economics-based approach in which eligibility for exemption is based on a market share threshold, in recognition of the fact that the behaviour of companies with little market power has little significant impact on competition in the market. It allows companies which do not have market power (i.e. those who have less than 30 per cent of the market) to benefit from a ‘safe haven’ within which they are no longer obliged to assess the validity of their agreements under the European Union competition rules. However, as with the de minimis Notice, there are some clauses, ‘hard-core restraints’, which are excluded from the safe haven. The Regulation is accompanied by Guidelines on Vertical Restraints (OJ C 291, 13 October 2000, p.1) designed to help undertakings to carry out their own assessment of their position in respect of Article 101 TFEU (ex Article 81 EC).

Key features of Regulation 2790/99

Article 3 introduces a cap of 30 per cent market share on the availability of the block exemption. This applies to the market share of the supplier except in the case of an exclusive supply obligation as defined in Article 1(c) of the regulation where it is the buyer’s share which is relevant. Over this threshold, an individual exemption can still be applied for.

Article 4 sets out the list of hard-core restrictions which will preclude the block exemption from applying, including the imposition of fixed or minimum resale prices, export bans and restrictions on passive sales.

Article 5 forbids direct or indirect non-compete clauses, although, in contrast to Article 4, inclusion of such clauses does not make the whole agreement ineligible for exemption.

Regulations exempting horizontal agreements

Regulation 2659/00: a block exemption for research and development agreements. The Commission recognises the value of research and development (R & D) and that there are advantages in small and medium-sized companies cooperating on R & D.

Regulation 2658/00: a block exemption for specialisation agreements.

SummaryIn this section, we have examined the ‘building blocks’ for a finding of an infringement of Article 101 TFEU (ex Article 81 EC). We have studied the Courts’ interpretation through the case law of a number of key concepts such as ‘agreement’ and ‘concerted practice’. The Commission’s early, very broad interpretation of Article 101 TFEU (ex Article 81 EC) to cover all restrictions on conduct has been replaced by an ‘economics-based’ approach, examining agreements in their economic context to see if there

† For example, in the case of Vertical Distribution Agreements, the Regulation permitted the supplier to restrict ‘active sales’, whereby the distributor actively tries to sell to customers outside his/her territory, for example by setting up a branch outside that territory. Meanwhile the Regulation prohibited any restriction on ‘passive sales’, whereby the distributor merely passively fulfils orders received from customers outside his/her territory. Thus the Regulation achieves a compromise between the commercial need to grant a degree of territorial protection to distributors on the one hand, and the need to ensure competition between distributors (parallel trade) in the single market on the other!


are actual or potential anti-competitive effects. The adoption of ‘new style’ block exemptions, particularly the one dealing with vertical restraints, has reduced the practical scope of Article 101 TFEU (ex Article 81 EC) by providing a ‘safe haven’ for companies which do not have market power, provided that their agreements do not include any of the ‘hard core’ restraints.

Self assessment questions1. What are the aims of EU competition law?

2. What are the four conditions to be met for exemption under Article 101(3) TFEU (ex Article 81(3) EC)?

3. What is the difference between active and passive sales?

4. Why were the ‘old style’ block exemptions criticised?

5. What kinds of agreement can be exempt under Regulation 2790/99?

6. The Regulation on vertical restraints provides exemption for companies below a market share cap. What percentage market share must not be exceeded to obtain the benefit of the exemption?

7. What is meant by a ‘hard-core restraint’? Give two examples.

8. What is the effect of including a ‘hard-core’ restraint in an agreement?

9. In what circumstances can the benefit of a block exemption be withdrawn?

Useful further reading Commission Notice Guidelines on the application of Article 81(3) of the Treaty

(2004/C 101/08, 27 April 2004).

Whish, R. Competition Law. (Oxford: OUP 2008) sixth edition [ISBN 9780199289387].

Korah, V. An Introductory Guide to EC Competition Law and Practice. (Oxford: Hart, 2007) ninth edition [ISBN 978141137544].

Korah, V. Cases and Materials on EC Competition Law. (Oxford: Hart, 2006) third edition [ISBN 978141136448].

11.3 Enforcement


14.80–14.110, pp.492–507.

Craig and de Búrca, Chapter 25: ‘Competition Law: Article 81’ pp.999–1002.

Regulation 1/2003, [2003] OJ L1/1, applied from 1 May 2004.

11.3.1 Regulation 1/2003Regulation 1/2003 marked a major decentralisation of the enforcement of the EU competition rules, intended to relieve the Commission of a huge workload, and allow it to concentrate its resources on investigating the most serious infringements. It replaced Regulation 17/62, one of the cornerstones of EU competition law for 40 years, which concentrated all powers of enforcement on the Commission. The system currently in place is one of ‘parallel competences’ in which a case may be dealt with by a single National Competition Authority (NCA), or by several NCAs in parallel, or by the Commission.

The Commission and NCAs will together form the European Competition Network (ECN), applying the European Union competition rules in close cooperation.

The system places responsibility on the undertakings themselves to assess whether their agreements/activities are compatible with the EU competition rules.


Some of the key articles of the Regulation are as follows.

Article 1

Under Article 1, the whole of Article 101 TFEU (ex Article 81 EC) is now directly effective. Specifically, Article 1(2) says that no ‘prior decision’ is needed for an exemption under Article 101(3) TFEU (ex Article 81(3) EC). Once an infringement of Article 101 TFEU (ex Article 81(1) EC) has been established, the defence is available to the undertaking(s) concerned to prove that the agreement, decision or practice fulfils the conditions for exemption under Article 101(3) TFEU (ex Article 81(3) EC) (Article 2).

Article 3 Relationship between Articles 101 and 102 TFEU (ex Articles 81 and 82 EC) and national competition laws

Whenever dealing with an agreement or practice covered by Article 101 or 102 TFEU (ex Article 81 or 82 EC) which may affect trade between Member States, NCAs are obliged to apply EU competition law, either on its own or alongside their national provisions (Article 3(1)). However, the supremacy of the EC rules over any conflicting national provisions is provided under Article 3(2).

National law can be applied alongside the European Union competition rules if it predominantly pursues ‘an objective different from that pursued by Articles 81 and 82’ (Article 3(3)).

Article 5 Powers of the competition authorities of the Member States

NCAs can apply Articles 101s and 102 TFEU (ex Articles 81 and 82 EC) in individual cases. They can decide whether the conditions of Article 101(3) TFEU (ex Article 81(3) EC) are satisfied. They can: order the ending of an infringement, order interim measures, accept commitments and impose fines, penalty payments or other national law penalties. This means that, for example, custodial sanctions may be imposed, even though there is no EU provision for such sanctions, if national rules allow such sanctions.

Article 6 Powers of the national courts

Article 101 TFEU (1), (2) (ex Article 81(1), (2)) and Article 102 TFEU (ex Article 82 EC) have always been directly effective in national courts. This Article now gives the national courts jurisdiction to apply Article 101(3) TFEU (ex Article 81(3) EC) as well. If a national court finds that the conditions of Article 101 TFEU (ex Article 81(3) EC) are satisfied it must hold that the agreement is valid with effect ab initio. It must then enforce the agreement and reject any claims for damages based on alleged violation of Article 101 (1) TFEU (ex Article 81(1) EC).

Chapter 3 Decisions of the Commission

This chapter is clearly influenced by the Commission’s experience under the Merger Regulation – some of the decisions permitted under that Regulation have now been added to the Commission’s powers when enforcing Articles 101 and 102 TFEU (ex Articles 81 and 82 EC) (see Articles 7 and 9 below). The four decisions the Commission can take in a given case are the following.

Article 7 Termination of the infringement As well as allowing the Commission to order the ending of an infringement of Article 101 or 102 TFEU (ex Article 81 or 82 EC), there is a new power to impose ‘behavioural or structural remedies’. Previously the Commission could only impose fines.

Article 8 allows the Commission to order interim measures in cases of urgency ‘due to the risk of serious and irreparable damage to competition’. There must be prima facie evidence of an infringement. The measures must be for a specified period, renewable if necessary. This power had already been established in the jurisprudence of the Court.


Article 9 Another new power is created by Article 9, which allows the Commission to accept commitments from the undertaking(s) to meet its concerns. It can take a decision making the commitments binding on the undertaking(s) and take no further action on the infringement. It can re-open the case, however, if there is a material change of facts or the commitments are not adhered to.

Article 10 Finally, the Commission can of course decide that there has been no breach, or that Article 101 TFEU (ex Article 81(3) EC) conditions for exemption are fulfilled.

Chapter IV lays down the rules for the close cooperation between the Commission and the NCAs, including requirements to exchange information and to inform each other before adopting any decisions (Article 11). The NCAs must inform the Commission when commencing an investigation; they should also inform the Commission ‘not later than 30 days before’ (Article 11(4)) the adoption of any decision requiring an infringement to be brought to an end, before ‘accepting commitments or withdrawing the benefit of a block exemption’ (which the NCAs are now able to do).

Article 11(6) says that if the Commission starts proceedings in a case, NCAs have no competence to start their own. If the NCA has already begun proceedings, the Commission must consult the NCA before starting its own.

The detailed arrangements for the allocation of cases between the Commission and the NCAs are set out in a separate notice: Commission Notice on Co-operation within the network of Competition Authorities [2004] OJ L 1123/18. Article 8 of this Notice introduces the concept of the ‘well-placed authority’ for dealing with a case. The Commission will be ‘well-placed’ if the agreement or practice has effects in more than three Member States (cross-border markets), or in several national markets.

Article 12 provides for exchange of information between the Commission and the NCAs.

Article 13 deals with the situation where two or more NCAs all receive the same complaint: if one of them is taking action, the others can suspend proceedings or reject the complaint. Similarly if an NCA receives a complaint which has already been dealt with by another NCA, it can reject it.

Article 14 Advisory Committee

Finally, the NCAs are ensured a say in the way the Commission exercises its own powers of decision: representatives of the NCAs make up the Advisory Committee on Restrictive Practices and Dominant Positions which must be consulted and give an Opinion before the Commission takes any decision on a case (Article 14). Consultation may be by meeting or by a written procedure, and the Commission must take ‘utmost account’ of the Committee’s Opinion and say how it has responded to it. The Advisory Committee does not give Opinions on cases being dealt with by NCAs, but an NCA can ask for a case to be put on the agenda, for example if the Commission is proposing to take over the case under Article 11(6).

Article 15 Cooperation with national courts

A national court can ask the Commission for information or an opinion on a case before it and must send copies of its judgments under Article 101 or 102 TFEU (ex Article 81 or 82 EC) to the Commission without delay. NCAs can submit observations to the national court. The Commission can submit observations ‘where the coherent application of Article 81 or 82 so requires’ (Article 15(3)).

Article 16 Uniform application of European Union competition law

Article 16 imposes on national courts and national competition authorities an obligation not to take decisions that conflict with decisions of the Commission. National courts must also avoid conflict with a decision ‘contemplated’ by the Commission – they can stay proceedings until the Commission has taken a decision, or use the preliminary reference procedure under Article 267 TFEU (ex Article 234 EC) to ask for the ruling on the question.


The Commission’s power under Article 10 (above) to take a decision on its own initiative on whether a particular practice is compatible with EU competition rules, or exempt, may be used to provide useful guidance to national courts and NCAs where there is uncertainty or a novel situation has arisen.

11.3.2 Investigative powers under Regulation 1/2003The Commission’s powers to search business premises under Regulation 17/62 were extended in Chapter V of Regulation 1/2003 to include the right to search the homes of directors, managers and other members of staff where a reasonable suspicion exists that books or other business records which might be relevant to the investigation are stored there (Article 21). This power is subject to review by the Court of Justice: national courts which are required to authorise such inspections can only review the authenticity and proportionality of the inspection, not its lawfulness. Officials of the NCAs are obliged to assist the Commission in carrying out searches. The decision by the Commission to undertake such a search will be taken after consulting the NCA in whose country the search is to be carried out. NCAs can also carry out inspections on their own behalf or at the request of another NCA. These provisions affirm the duty of Member States under Article 105 TFEU (ex Article 85 EC) to afford assistance to the Commission in the exercise of its functions under the Treaty.

The right of access to the file, subject to the interests of undertakings in the protection of business secrets and requirements of confidentiality, is now guaranteed in the Regulation itself, reflecting earlier case law of the European Courts.

Chapter VI deals with penalties, and the Regulation empowers the Commission to impose fines of up to ten per cent of the total turnover in the previous business year of each of the undertakings involved in an infringement of the competition rules (Article 23(2)). Such a fine may also be imposed for failure to comply with commitments or an order for interim relief. The periodic penalty payment which can be imposed to compel undertakings to terminate such breaches has been increased to a maximum of five per cent of the average daily turnover in the previous business year (Article 24). The maximum fine for supplying incorrect or misleading information and other procedural offences has also been increased, to 1 per cent of the total turnover in the preceding business year (Article 23(1)).

Guidance notices

Years of operation of the rules by the Commission and Court mean that undertakings, national competition authorities and national courts are aware of the key principles governing the application of Articles 101 and 102 TFEU (ex Article 81 and 82 EC) and can apply them themselves. Nonetheless, the Commission, in April 2004, issued a raft of new Notices to provide guidance to them and try to achieve consistency of approach. These include:

Notice on cooperation within the network of National Competition Authorities (Antitrust) Guidelines [2004] OJ C-101/43, [2004] 4 CMLR 32-1651, dealing with the European Competition Network, work-sharing, exchange of information, pending cases, evidence, fines, leniency.

Commission Notice on the cooperation between the Commission and the Courts of the EU Member States in the application of Articles 81 and 82 EC, [2004] OJ C-101/54, [2004] 4 CMLR 33-1669.

Other Notices on:

handling of complaints by the Commission

novel questions that arise in individual cases (Guidance letters)

the effect on trade concept

guidelines on the application of Article 81(3) EC – discussed above in Section 11.2.


There is also a procedural Regulation: Regulation 773/2004, [2004] OJ L123/11[2004] 4 CMLR 31-1638. This deals with initiation of proceedings, complaints, access to the file, rights of the defence, hearings and confidentiality.

SummaryA revolution in the enforcement of EU competition law has taken place. The Commission has given up its exclusive power to grant exemptions. The whole of Article 101 TFEU (ex Article 81 EC) is now directly effective. National courts now have a more complex task in competition cases because they may be called upon to weigh the pro- and anti-competitive effects of an agreement which contains restrictions on competition. The abolition of the notification procedure has shifted the onus on to companies themselves to assess whether their agreements restrict competition. The Commission has issued a series of guidance notices to help all the new players perform their new roles in the enforcement of EU competition law in a way which is consistent with each other and with the Commission.

Self-assessment questions1. Which body(ies) can/could grant exemption under Article 101 TFEU (ex Article

81(3) EC):

a. before 1 May 2004?

b. after 1 May 2004?

2. What is the European Competition Network?

3. Explain the powers of national courts when enforcing EU competition law.

4. What rights does the Commission have to intervene in national court proceedings?

5. What are the maximum fines and penalty payments that can be imposed on undertakings for breaches of the competition rules?



14.52–14.79, pp.497–510.

Craig and de Búrca, Chapter 26: ‘Competition law: Article 82’.

This Article punishes undertakings in a position of strength on the market when they abuse their position. It is not dominance or strength in itself which is unlawful but its abuse. However, behaviour which may be lawful when practised by a non-dominant company may be unlawful when carried out by a company in a dominant position.

A dominant position does not exist in the abstract, and neither the Commission nor the General Court (pre-Lisbon, the Court of First Instance or CFI), can reach a conclusion that a firm has a dominant position and has abused it without a detailed economic analysis. The approach of the Commission and the General Court /Court of Justice is:

to ascertain the relevant market and then

to assess the undertaking’s power on that market.

It is necessary as a first stage to determine the extent of the relevant product and geographic market. The Commission can then assess the market share of the company under investigation. It also considers other factors in concluding whether or not the undertaking is dominant (see below).

Go to your study pack and read Whish, R. ‘Article 82’, Chapter 5 of Competition Law. (London: LexisNexis UK, 2003), fifth edition.


11.4.1 Relevant product marketThe key question here is: which other products is this product in competition with?

The answer to this question is of great importance under Article 102 TFEU (ex Article 82 EC): if the product market is widely defined, there is less likelihood that a particular undertaking will be dominant. Conversely, if the market is narrowly defined, the likelihood of dominance increases. Products within one product market are those which are regarded as ‘interchangeable’ by consumers ‘by reason of their characteristics, price and intended use’; see Case 27/76 United Brands [1978] ECR 207. The issue was whether, in economic terms, there was cross-elasticity of demand between bananas and other kinds of fruit. If the price of bananas rose significantly, would customers readily switch to buying other fruits (seeing them as interchangeable)? Or did the banana have particular characteristics distinguishing it from other fruits so that customers would continue to buy bananas despite the price rise (not interchangeable)? The Court of Justice agreed with the Commission’s finding that bananas fulfil specific consumer needs and are in a product market of their own. United Brands argued for a wider product market, because its market share in the fruit market as a whole was very small, whereas its share of the banana market was over 40 per cent!

The Commission and Court also consider questions of cross-elasticity of supply: can suppliers of other products quickly and easily switch to making the product in question? If so, they can readily compete in the same product market – see Case 322/81 Michelin v Commission [1983] ECR 3461.

It was not easy to switch from producing tyres for cars to producing tyres for heavy goods vehicles so there was not elasticity of supply between them: they were separate product markets.

In Case 6/72 Continental Can Co. Inc. v Commission [1973] ECR 215 the Commission’s Decision, finding that Continental Can was dominant on the market for light metal cans for meat and fish, was annulled because, inter alia, it had not shown that customers could not easily manufacture the required cans themselves.

The Commission’s methodology is now set out in: Commission Notice on the Definition of the Relevant Market for the Purposes of Community Competition Law (1997) OJ C372. The Commission explains how it assesses substitutability of demand on the basis of the ‘SSNIP’ test: if there is a ‘small but significant non-transitory increase in price’, will so many customers switch to another product that the price rise will have been unprofitable? Substitutability of supply is also taken into account.

11.4.2 Relevant geographic marketThe key question here is: over what geographical area are producers in competition with each other? Some markets are global (e.g. the platinum market, or the jumbo jet market); others may be local, for example if the product is highly perishable or very expensive to transport.

The relevant geographic market is the area in which available and acceptable substitutes to the product exist. This is a practical, not a theoretical, question which depends on empirical evidence of consumption and production patterns, volume and purchasing habits.

In Case 27/76 United Brands v Commission [1978] ECR 207, the Court of Justice defined the geographic market as ‘an area in which the objective conditions of competition are the same for all traders’.

The Commission Notice on the Definition of the Relevant Market for the Purposes of Community Competition Law (1997) OJ C-372 details the Commission’s method of deciding the geographic market.

Go to your study pack and read paragraphs 12–129 of the extract from Case 27/76 United Brands Co. and United Brands Continental BV v Commission.

Go to your study pack and read paragraphs 37–45 of the extract from Case 322/81 NV Nederlandsche Banden Industrie Michelin v Commission of the European Communities.

Go to your study pack and read the extract from Case 6/72 Europemballage Corporation and Continental Can Company Inc. v Commission of the European Communities.


11.4.3 DominanceThe leading case on the definition of dominance under Article 102 TFEU (ex Article 82 EC) is: Case 27/76 United Brands v Commission [1978] ECR 207.

The Court of Justice defined a dominant position as: ‘a position of economic strength enjoyed by an undertaking which enables it to prevent effective competition being maintained on the relevant market by giving it the power to behave to an appreciable extent independently of its competitors, customers and ultimately of its consumers’.

Market share

Dominance is determined firstly by market share of the relevant market: see United Brands (above).

In Case 62/86 AKZO Chemie v Commission [1991] ECR I-3359, the Court held that a company with 50 per cent share or above will normally be dominant.

The market share must have been held for a period of time: see Case 85/76 Hoffmann-La Roche v Commission [1979] ECR 461.

It is important to compare the market shares of other companies on the market. In C-95/04 British Airways v Commission [2007] ECR I-2331, the Court of Justice found British Airways to be dominant in the market for air travel agency services, where it had a share of 39.7 per cent. The Court took into account the fact that the nearest rival, Virgin, had only 5.5 per cent.

Barriers to entry

These are things which make it difficult for new companies to enter a particular market. For example, it is easier to set up business as a gardener or a window cleaner than it is to start manufacturing tractors. There are many factors which may make it harder or easier to enter a market. If barriers to entry are high, the companies already operating on that market do not have to take into account the threat of potential competitors entering the market. On the other hand, if barriers to entry are low, they do have to think about potential new entrants: if they put up prices, they run the risk of attracting more businesses into this lucrative market.

Factors which may constitute ‘barriers to entry’ include:

Legal provisions See Case 333/94P Tetra Pak Int. SA v Commission [1996] ECR I-5951.

Superior technology See Case 27/76 United Brands v Commission [1978] ECR 207; Case 322/81 Michelin v Commission [1983] ECR 3461; Case 85/76 Hoffmann-La Roche v Commission [1979] ECR 461.

Deep pocket See Case 27/76 United Brands v Commission [1978] ECR 207; Case 6/72 Continental Can Co. Inc. v Commission [1973] ECR 215.

Economies of scale, vertical integration and well-developed distribution systems See Case 27/76 United Brands v Commission [1978] ECR 207; Case 85/76 Hoffmann-La Roche v Commission [1979] ECR 461: a well-developed sales network.

Product differentiation/brand image See Case 27/76 United Brands v Commission [1978] ECR 207: because of the high profile Chiquita banana – lots of advertising had established the brand image.

Activity 11.6a. Why is a definition of the relevant market a vital first stage in assessing whether

Article 102 TFEU (ex Article 82 EC) has been breached?

b. What factors did the Court of Justice take into account in deciding that bananas were in a separate product market from the fruit market in general in the United Brands case?


c. Summarise the procedure which the Commission follows when defining (i) relevant product market and (ii) relevant geographic market, according to its 1997 Notice?

d. How would you decide whether fountain pens are part of the same product market as biros?

e. Look up a case in which Article 102 TFEU (ex Article 82 EC) was applied and list the factors which the Commission/Court of Justice took into account when deciding whether the undertaking concerned was dominant in the relevant market (a good example is the Hoffmann-La Roche case).

No feedback provided for part e.

11.4.4 ’Substantial part’ of the common marketArticle 102 TFEU (ex Article 82 EC) requires that an undertaking must be dominant ‘within the internal market or in a substantial part of it’. This has been interpreted as a de minimus threshold. Part of a Member State is ‘substantial’, see: Cases 40–48, 50, 54–56, 111 & 113–114/73 Suiker Unie [1975] ECR 1663: Southern Germany was sufficient to fulfil the requirement.

11.4.5 Collective dominanceUntil the early 1990s, Article 102 TFEU (ex Article 82 EC) could only be applied against single dominant undertakings. However, the CFI (now the General Court) signalled a change in this position in Joined Cases T-68/89 and T77-78/89 Società Italiano Vetro SpA v EC Commission (Flat Glass) [1992] ECR II-1403. It stated (obiter) that there is ‘nothing in principle to prevent two or more independent undertakings on a specific market being united by such economic links that together they hold a dominant position vis à vis other operators on the same market’.

The precise nature of the links required is not defined and can vary from case to case. The important thing seems to be the result of those links, namely that ‘in order for collective dominance to exist, the undertakings in the group must be linked in such a way that they adopt the same conduct on the market’: see Case 393/92 Municipality of Almelo v Energiebedrijf IJsselmij NV [1994] ECR I-1477.

The first time the Court of Justice actually upheld a finding of collective dominance was in Joined Cases C-395/96P and C-396/96P Compagnie Maritime Belge v Commission [1996] ECR II-1201 (the Almelo case was a preliminary reference ruling and so the decision was left to the national court).

The Court of Justice held that ‘a dominant position may be held by two or more economic entities legally independent of each other, provided that from an economic point of view they present themselves or act together on a particular market as a collective entity. That is how the expression collective dominant position… should be understood’. What was required to establish such a collective entity was whether there were ‘links’ or other ‘factors which give rise to a connection between the undertakings concerned’ which ‘enabled them to act together independently of their competitors, their customers and consumers’.

The Court stated that the existence of an agreement or concerted practice between the undertakings does not necessarily create such economic links. However, an agreement or concerted practice between the undertakings can ‘result in the undertakings concerned being so linked as to their conduct on a particular market that they present themselves on that market as a collective entity vis-à-vis their competitors’. The Court then made it clear that the ‘parallel behaviour’ of oligopolies can be scrutinised in the context of Article 102 TFEU (ex Article 82 EC). Thus the parallel behaviour by an oligopoly which is legal under Article 101 TFEU (ex Article 81 EC) may fall to be scrutinised under Article 102 TFEU (ex Article 82 EC) to see whether it constitutes collective dominance. Behaviour which constitutes abuse of the collective dominant position is then necessary before there is a breach of the Article.

Go to your study pack and read paragraphs 41–45 of the extract (summary) from Case C-395/96 Compagnie maritime belge transports SA v Commission of the European Communities.


In Case T-228/97 Irish Sugar v Commission [2001] ECR I-5333, [1999] 5 CMLR 1300, the Commission’s finding of ‘vertical’ collective dominance between Irish Sugar and a distributor of sugar, Sugar Distributors Ltd., was upheld by the CFI (now the General Court). Factors that contributed were: the structure of policy-making between the companies and direct economic ties between them. The Court also held that it is possible to establish abuse of a dominant position in a case of collective dominance whether there has been ‘joint’ or ‘individual’ abuse, that is, it is only necessary for one of the companies to have carried out the abuse.

11.4.6 Definition of abuseThis is a flexible concept. Article 102 TFEU (ex Article 82 EC) lists some examples but is not exhaustive. The Court of Justice has defined it broadly as behaviour which has ‘the effect of hindering the maintenance of the degree of competition still existing in the market or the growth of that competition’ (Case 85/76 Hoffmann-La Roche v Commission [1979] ECR 461).

Normal competitive activity, such as offering better quality products or lower prices than your competitors is not an abuse. That is ‘competition on the merits’. An abuse is where the dominant company uses other means to outflank or exclude the competition:

Article 102 TFEU (ex Article 82 EC) ‘covers practices which are likely to affect the structure of a market where, as a direct result of the presence of the undertaking in question, competition has already been weakened and which, through recourse to methods different from those governing normal competition in products or services based on traders’ performance, have the effect of hindering the maintenance or development of the level of competition still existing on the market (Judgment of Court of Justice in Michelin, paragraph 70).

This extract makes clear that Article 102 TFEU (ex Article 82 EC) covers not only ‘exploitative’ abuses, which exploit consumers, such as excessive prices, but also ‘anti-competitive’ abuses which affect the competitive structure of the market by excluding actual or potential competitors.

Dominance is not illegal in itself. The dominant company has to carry out an abuse to be in breach of Article 102 TFEU (ex Article 82 EC). Nonetheless the Court held in Michelin that a dominant company has a ‘special responsibility’ not to act in a way that will lead to a decrease of competition on the market.

There is no equivalent of the exemption in Article 101 TFEU (ex Article 81(3) EC): abuse can never be exempt from Article 102 TFEU (ex Article 82 EC). However, conduct which might in some circumstances amount to abuse may, in other circumstances, be ‘objectively justified’.

11.4.7 Types of abuseAmong the types of abuses that have been condemned by the European Courts are the following:

Excessive prices

Using your power on the market to charge customers excessively high prices is an abuse, but it is difficult to prove. How much is too much? The Court of Justice said in United Brands that it was necessary to work out the difference between the production costs and the selling price to see if the company was making ‘super-profits’. (It was not enough for the Commission to say that UB was charging more than others for its bananas.) On the other hand, economists have pointed out that the market price of goods is not just a question of production costs but of supply and demand.

Predatory pricing

Price cuts designed to drive out the competition constitute abuse: 62/86 AKZO Chemie v Commission [1991] ECR I-3359. Again it can be difficult to decide whether the lower price is the result of ‘fair’ competition (i.e. the dominant company is simply more efficient and able to produce the goods more cheaply), or whether it is a below-cost price to force competitors out. In Akzo, the Court of Justice decided that pricing


below ‘average variable costs’ was automatically an abuse because the only reason a company would charge less for a product than the cost of the materials/labour used, would be to drive out competitors. On the other hand, pricing below ‘total’ costs (i.e. including a proportion of overheads) was not conclusive: evidence of an actual plan to drive out competitors had to be shown.

Selective pricing

In Case T-228/97 Irish Sugar v Commission [1999] ECR II-2969, [1999] 5 CMLR 1300, the CFI (now the General Court) held that Irish Sugar’s policy of selective pricing was an abuse. Irish sugar offered lower prices to its competitors’ customers while maintaining higher prices for its regular customers.

Fidelity discounts

Offering discounts in return for customers agreeing to buy all their vitamins from the dominant company was condemned in Case 85/76 Hoffmann-La Roche & Co. AG v Commission [1979] ECR 461. It deprived competitors of the opportunity of selling to those customers. On the other hand a straightforward ‘volume’ discount, whereby the customer obtains a bigger discount if they buy a large quantity of the goods, is not an abuse because it is simply a way of passing on to the customer some of the savings in transaction costs (it is cheaper pro rata to supply 1,000 packets of vitamins than 100 packets). This type of discount does not exclude competitors a priori: they are free to compete for that customer’s order.

Other examples of discount systems which had the effect of tying customers to the dominant supplier are: Case 322/81 Michelin v Commission [1983] ECR 3461 and Case 310/93P BPB Industries and British Gypsum v Commission [1995] ECR I-865, [1997] 4 CMLR 238.

In C–95/04 British Airways v Commission [2007] ECR I-2331 British Airways had abused its position in the air travel agency market by offering loyalty payments and commissions to travel agents which were not related to increased efficiency. These effectively tied travel agents to BA. The Court of Justice upheld the Commission’s finding that the incentive schemes offered were also contrary to Article 102(c) TFEU (ex Article 82(c) EC) since travel agents who sold the same number of tickets received different commission rates. The abuse of a dominant position in this market affected competition in the related market of air transport to and from points in the UK.

Tying

This arises where a dominant company in relation to one product (the ‘main’ product) obliges customers to buy another product as a condition of supplying the ‘main’ product. This has the effect of extending the dominance from the main product market to the second product. An example is Case 333/94P Tetra Pak v Commission [1996] ECR I-5951. Tetra Pak insisted that buyers of its machines for filling cartons (‘asceptic packaging machines’) should also buy all their cartons from Tetra Pak as well. This was an abuse because there were other manufacturers of suitable cartons who were thereby excluded from competing to supply those customers (see Article 102(d) TFEU (ex Article 82(d) EC)).

In T-201/04 Microsoft v Commission (2007) judgment of 17 September 2007 the CFI (now the General Court) approved the Commission’s conclusion that Microsoft engaged in the abusive bundling of its media player with the Windows operating system. The Court gave broad support for the four conditions upon which the Commission based its finding. First, the undertaking concerned must have a dominant position on the market for the bundling product. Second, the bundling product and the bundled product must be two separate products. Third, consumers must not have a choice to obtain the bundling product without the bundled product. Fourth, the practice must foreclose competition. The CFI agreed with the Commission that the four conditions were indeed present in Microsoft’s case. The bundling practice enabled the company to obtain an unparalleled advantage in distributing its products and ensuring the ubiquity of Windows Media Player on client PCs throughout the world. It was also noted that the Windows operating system is system software, whereas Windows


Media Player is application software. The two components were therefore separate products. As such, the bundling of application software that could be made available on a stand-alone basis had the effect of excluding competitors who did not enjoy the same distributional network, thereby distorting market competition.

Refusal to supply

It is an abuse for a dominant supplier of raw materials to cut off supplies to a company which uses those materials to make another product, so that the dominant company can start making that product itself without competition from that other company; see Case 6, 7/73 Commercial Solvents v Commission [1974] ECR 223.

It is also an abuse to refuse to supply a distributor in order to punish him/her for promoting a competitor’s products: Case 27/76 United Brands v Commission [1978] ECR 207. The Court of Justice held that it is an abuse to refuse to supply ‘a long-standing customer who abides by normal commercial practice’. (Obviously if the customer did not pay its bills, refusal to supply would be ‘objectively justified’ as that is not ‘normal commercial practice’!)

See also Case 310/93P BPB Industries and British Gypsum v Commission [1995] ECR I-865, [1997] 4 CMLR 238.

Refusal to supply ‘essential facilities’

In Case T-69, 70, 76–77 and 91/89 RTE, BBC & ITP v Commission [1991] ECR 61-485, the Court of Justice made clear that an abuse does not only arise where the refusal to supply is against a ‘long-standing’ customer. Refusing to grant a copyright licence to a new customer was an abuse because it prevented the emergence of a new product for which there was customer demand.

The extent to which competition law should oblige a dominant company to share its facilities with other companies to enable them to compete with the dominant company is controversial. For example, if a company owns a port facility and operates ferry services from that port, is it obliged to allow another company access to that port so that it can provide a competing ferry service? There are numerous decisions in which the Commission has held that to refuse access to such facilities is an abuse. However, the Court of Justice has adopted a cautious approach to the so-called ‘essential facilities doctrine’ and laid down a strict test in Case 7/97 Bronner v Mediaprint [1998] ECR I-7791: the facility must be indispensable. It must be shown that there are ‘technical, legal or even economic obstacles capable of making it impossible, or even unreasonably difficult…’ to compete without access to the facility concerned.

Case 418/01 IMS Health [2004] ECR I-5039, [2004] 4 CMLR 28, 1543, arose from an Article 267 TFEU (ex Article 234 EC) reference to the Court of Justice and, like Case T-69, 70, 76–77 & 91/89 RTE, BBC & ITP v Commission above, concerned refusal to supply in the context of intellectual property rights. The case concerned refusal to grant a licence for a data system which was protected by copyright. In such a case, the Court of Justice held that for a refusal to supply to be abusive, three cumulative conditions had to be fulfilled:

the refusal prevented the emergence of a new product for which there was a potential consumers’ demand

the refusal was unjustified

and it would exclude any competition on the secondary market.

The secondary (or downstream) market is the market ‘on which the product or service in question is used for the production of another product or the supply of another service’ (paragraph 42). This case was an Article 267 TFEU (ex Article 234 EC) reference, so the application of the test to the facts was left to the national court.

In the Microsoft decision (2004) (upheld in Case T–201/04 Microsoft v Commission (17 September 2007)) the Commission found Microsoft to enjoy a ‘quasi-monopoly’ (super-dominant) position in the market for client PC operating systems and to be

Go to your study pack and read paragraphs 23–25 of the extract from Joined Cases 6/73 and 7/73 Instituto Chemioterapico Italiana & Commercial Solvents v Commission.

Go to your study pack and read paragraph 52 of the extract from Case 418/01 IMS Health GmbH & Co. OHG v NDC Health GmbH & Co. KG.


leveraging that dominance onto the markets for work group server operating systems. A press release from the Commission explains that ‘work group server operating systems are operating systems running on central network computers that provide services to office workers around the world in their day-to-day work such as file and printer sharing, security and user identity management’. By refusing to supply interoperability information to competitors so that their work group servers could achieve interoperability with Windows PCs and servers, Microsoft was found to have abused its dominant position and was fined €497 million. Microsoft had provided interoperability information for earlier versions of Windows, but had refused to do so for Windows 2000. The Commission decision ordered Microsoft to disclose complete and accurate interface documentation, allowing Microsoft’s competitors in the work group operating systems market to achieve full interoperability with Windows PCs and servers as it would not be possible for them to compete effectively otherwise, owing to the near ubiquity of Microsoft PC operating systems. Microsoft would be entitled to ‘reasonable remuneration’ for licensing its software. When Microsoft failed to comply, a further decision was taken in November 2005 in which the Commission warned Microsoft that it would impose a daily fine of up to €2 million using its powers to impose penalty payments under Article 24(1) of Regulation 1/2003. In July 2006, Microsoft was fined €280 million for its failure to comply and the company was again asked to supply complete and accurate interoperability information on reasonable terms.

In Case T-201/04 Microsoft v Commission (17 September 2007) the CFI substantially upheld the Commission’s 2004 decision and the original fine. It held that while the ‘refusal by the owner of an intellectual property right to grant a licence, even where it is the act of an undertaking in a dominant position, cannot in itself constitute an abuse of a dominant position, the exercise of the exclusive right by the owner might however, in exceptional circumstances, give rise to abusive conduct’ (paragraph 331). For such ‘exceptional circumstances’ to apply, the three conditions set out in IMS, above, must be fulfilled.

First of all, it was necessary to identify an ‘upstream’ market and a ‘downstream’ market. The product in the upstream market must be indispensable for supply of the downstream market. Although the company must be dominant in the upstream market, it is not necessary for it also to be dominant in the downstream market. The Court identified the upstream market in this case as the market for client PC operating systems in which Microsoft had a quasi-monopoly (90 per cent of the market), and the downstream market as the work group server operating systems market. It confirmed that Microsoft’s quasi-monopoly in the PC operating systems market meant that non-Windows work group server operating systems which are not able to interoperate with Windows are at a great disadvantage. In surveys of IT executives, other companies’ work group server operating systems were rated better for reliability and integrated security than the Microsoft version; nonetheless, because of the importance of interoperability with Windows PC operating systems, the market share of those other companies was shrinking and Microsoft’s was growing. Applying the IMS test, the Court held that whereas the refusal to supply in this case did not prevent the appearance of ‘a new product’ (see IMS test above), the prevention of the appearance of a new product was not the ‘only parameter which determines whether a refusal to license an intellectual property right is capable of causing prejudice to consumers within the meaning of Article 82(b) EC’. It was sufficient that the refusal to supply ‘limited technical development to the prejudice of consumers’. In addition, the supply of interoperability information was likely to result in Microsoft’s competitors developing different products from those offered by Microsoft.

In regard to the third condition set out in IMS above, it was not necessary that the refusal to supply eliminated all competition; rather, ‘what is required is that the refusal to supply the licence… is liable to, or is likely to, eliminate all effective competition on the market’ (paragraph 563, emphasis added). By refusing to license the interoperability information, Microsoft was effectively able to eliminate effective competition in the work group server operating server market. The CFI (now the General Court) concluded that


[owing] to the lack of interoperability that competing work group server operating system products can achieve with the Windows domain architecture, an increasing number of consumers are locked into a homogeneous Windows solution at the level of work group server operating systems (paragraph 650).

Finally, Microsoft’s claim that the refusal to supply was objectively justified by the need to protect its incentives to innovate was rejected.

11.4.8 Effect on inter-state tradeIt must be shown that the abuse affects trade between Member States in order for European Union law to apply. Even if there is no trade between Member States in the product in question, this condition is satisfied where the conduct (the alleged abuse) brings about an alteration in the structure of competition in the common market, for example by eliminating an important EU producer even if all the products are exported to third countries: Cases 6, 7/73 Commercial Solvents v Commission [1974] ECR 223.

11.4.9 Mergers – outline onlyThe EU Treaties do not contain any express provision to deal with mergers and acquisitions, even though these can have important consequences for competition. Some attempts were made to use Articles 101 and 102 TFEU (ex Articles 81 and 82 EC) to fill this gap: in Case 6/72 Continental Can [1973] ECR 215, the Court of Justice held that it is an abuse of a dominant position under Article 82 EC for a dominant company to take over a rival company on that market. However, Article 82 EC could only apply to mergers where one of the parties was in a dominant position.

In Cases 142 and 156/84 BAT [1987] ECR 4487, it was suggested that Article 101 TFEU (ex Article 81 EC) might apply where companies acquired cross-shareholdings as this would reduce competition between them. The precise circumstances in which Article 101 TFEU (ex Article 81 EC) would be breached were unclear, however, and this led to considerable uncertainty.

Finally, in 1989 the Council enacted the Merger Regulation 4064/89 on the control of concentrations between undertakings. This has now been replaced by Council Regulation (EC) No 139/2004 of 20 January 2004. The detailed examination of its provisions and application are beyond the scope of this course.

Activity 11.7Problem question Quickprint, an Italian company, has developed a new method for film processing, using laser technology, which is faster and cheaper than existing methods. It has approached chemists and photographic shops in the UK, offering a cheaper service than their current film processors.

Europrint is a major film processing company with a 42 per cent share of the UK market for film processing and an 18 per cent share of the EU market. It has a network of representatives, has built up a reputation for reliability, and has processing facilities spread throughout the UK. Europrint has recently introduced the following new terms of business:

it has cut its prices by 20 per cent in the UK, making its service cheaper than that of Quickprint

it offers a further 10 per cent discount to outlets which agree to send all their film for processing to Europrint.

Europrint has refused to accept any further film for processing from Superpill, a chemist chain in England, because Superpill is running a special promotion for Quickprint services. This is a problem for Superpill because at this stage Quickprint’s technology is not suitable for all types of film, and Superpill still needs to use Europrint services if it is to offer a full range of film processing to its customers.

Quickprint seeks your advice on whether Europrint’s actions may infringe European Union competition law. Advise Quickprint.


SummaryWe have examined the requirements for a breach of Article 102 TFEU (ex Article 82 EC). The analysis essentially has three stages. First, the relevant product and geographic market must be defined. Then it must be shown that the undertaking is dominant on that market by looking at its market share and the extent of existing and potential competition it faces. The essence of dominance is being so powerful on the market that the company is relatively immune from competitive pressure. Recently the Court has accepted that there can be collective dominance by more than one company where they are linked in such a way that they adopt the same conduct on the market. The third stage involves examining the behaviour of the company(ies) to see if it will lead to further reduction of competition on the market, or exploits consumers. The final requirement is that the abuse must affect trade between Member States, or affect the structure of competition in the EU.

Self-assessment questionsExplain the following terms:

dominant position

abuse of dominant position

relevant product market

cross-elasticity of supply and demand

relevant geographic market

predatory pricing.

Sample examination questions Question 1 Xox plc wants to produce video-cassette recorders and is thinking of establishing a two-tier distribution system. It wants to appoint an exclusive distributor for each Member State and allow that distributor to supply retailers in its territory. At the moment, prices in Spain are lower than those in France. Xox wants to minimise the possibilities of retailers or the distributor in Spain, Fuego SA, selling Xox sets to dealers in France.

Xox also wants to assure customers throughout the European Union of the availability of installation and repairs for Xox sets by qualified engineers who will call at customers’ homes within a 50 km radius of the shop at which they bought the set.

Explain the legal problems Xox faces and suggest ways in which they might be overcome.

Question 2 Discuss the significance, both for EU law in general and for EU competition policy in particular, of two of the following:

a. Joined Cases 56 and 58/64 Consten and Grundig [1966] ECR 299

b. Case 27/76 United Brands [1978] ECR 207

c. Case 48/69 ICI v Commission (Dyestuffs) [1972] ECR 619

d. Joined Cases 116–117, 125–129 A. Ahlstrom Osakeyhtio v Commission [1988] ECR 5193 (wood pulp).

Question 3 In Consten and Grundig the Court of Justice confirmed the Commission’s view that Article 101 TFEU (ex Article 81 EC) could apply to vertical agreements. The court also recognised that the agreement in question did have some pro-competitive effects. Why did it still hold it to be illegal?

How does subsequent secondary legislation reflect the Commission and Court’s attitude to vertical agreements?

Question 4 How do the Commission and the Court of Justice determine the relevant market when considering whether a company is dominant under Article 102 TFEU (ex Article 82 EC)? What factors other than market share may be taken into account in determining whether a company is dominant?


Advice on answering the questionsQuestion 1 Explain the requirements for a breach of Article 101 TFEU (ex Article 81 EC) and apply them to the facts. Undertaking; agreement; appointment of distributors with exclusive territories: object or effect of restricting competition? (Consten and Grundig; Maschinenbau Ulm) Effect on trade between Member States, compartmentalisation of market by trying to keep price differences (e.g. C & G, Volkswagen). Explain Commission’s approach to exclusive distribution agreements in the old and new style block exemptions: prohibition of ‘passive sales’ is a hard-core restraint but Xox can restrict ‘active sales’ outside the exclusive territory.

Limit on repairs to within 50km of the shop where the set was bought: likely to deter customers from buying set in another Member State even if cheaper; restriction of intra-brand competition, ‘indirect’ export ban. Advice to Xox: depends on Xox share of the relevant market. If under 30 per cent, can get benefit of exemption under Regulation 2790/99 for vertical restraints. Explain main provisions, prohibited clauses Article 4: Xox’s agreement must allow passive sales, no fixed prices to be imposed. If Xox market share over 30 per cent, must seek individual exemption.

Question 2 A question only to be attempted if you have in-depth knowledge of two of these cases – if you do, it is a lovely question giving you plenty of scope to display that knowledge!

a. Consten and Grundig – Significance for EU competition policy: leading case in which the Court laid down key principles for the interpretation of Article 101 TFEU (ex Article 81 EC): meaning of ‘object or effect’, application to vertical restraints and intra-brand competition; interpretation of the requirement for an ‘effect on trade between Member States’; approach to the four requirements for exemption under Article 101(3) TFEU (ex Article 81(3) EC); severability of restrictive clauses under Article 101 TFEU (ex Article 81(2) EC). A particularly good answer would discuss the arguments of the parties and the Advocate General and explain why these were rejected by the Court.

b. Significance for EU law in general? The emphasis on the creation of a single market, a fundamental objective of EU law, and interpreting Article 101 TFEU (ex Article 81 EC) to contribute to that objective.

c. United Brands – Significance for EU competition policy: leading case on the interpretation of Article 102 TFEU (ex Article 82 EC). Defined and applied the concepts of relevant market, dominant position and abuse and the approach to excessive pricing, discriminatory pricing, refusal to supply. For EU law generally, again the use of Article 102 TFEU (ex Article 82 EC) to support the single market objective – the ‘green banana’ clause.

d. Dyestuffs – leading case on concerted practice under Article 101 TFEU (ex Article 81 EC); explain the definition, evidence, availability of oligopoly defence in cases of concerted practice.

e. Woodpulp – leading case on the evidential value of parallel conduct for proving concerted practice under Article 101 TFEU (ex Article 81 EC). Need to discuss the issue of whether conscious collusion is required, not mere parallelism. If there is a plausible alternative explanation for the parallel conduct, it is not proof of concerted practice. Also the leading case on the extra-territorial jurisdiction of the EU Commission in competition matters.

Question 3 Explain what is meant by a vertical agreement, why the Court of Justice held that Article 101 TFEU (ex Article 81 EC) applied to these and how the particular agreement in the case breached Article 101 TFEU (ex Article 81 EC) (restriction of intra-brand competition leading to compartmentalisation of the single market).

Explain the pro-competitive effects of C & G’s agreement (increase in inter-brand competition in France). Discuss the difference between the US ‘rule of reason’ approach and the approach taken by the Court of Justice in Consten and Grundig. The former weighs the pro- and anti-competitive effects of an agreement in order to


decide whether the benefits outweigh the drawbacks for competition before deciding whether there is a breach. InConsten and Grundig, the Advocate General had argued in favour of a similar approach, but the Court of Justice held that the structure of Article 101 TFEU (ex Article 81 EC) requires a two-stage analysis: first whether there is a restriction of competition under Article 101(1) TFEU (ex Article 81(1) EC) – if so, there is a breach; only after finding that there is a breach is it necessary to go to stage two and weigh the pro- and anti-competitive effects under Article 101(3) TFEU (ex Article 81(3) EC).

The second part of the question requires you to explain how this approach was followed in the secondary legislation adopted by the Commission in relation to vertical restraints. Explain the ‘old style’ block exemptions under which most kinds of vertical agreements (e.g. exclusive distribution) are treated as infringing Article 101 (1) TFEU (ex Article 81(1) EC) but exempted provided their clauses are permitted under a block exemption regulation. These reflect the very broad scope given to Article 101 TFEU (ex Article 81 EC) by the Commission and Court, and the centralisation of the Commission’s power through its exclusive right to grant exemptions under Regulation 17/62. Note that the Court has not always given such a wide scope (e.g. Pronuptia, Metro (selective distribution), Delimitis). Then explain how the approach to vertical restraints has recently changed by block exemption Regulation 2790/99. There is still the concept of restriction ‘by object’, reflected in the ‘hard-core’ restraints, but generally there has been a shift to a more economics-based approach, narrowing the scope of Article 101 TFEU (ex Article 81 EC) by providing a safe haven for companies which do not have market power.

Question 4 Explain the two aspects of relevant market: product and geographic. Commission and Court’s method of determining product market: United Brands – demand-side substitutability; Continental Can – supply-side substitutability. Both tests used in Michelin. Geographic market: United Brands. Discuss the Commission’s Notice on Determining the Relevant Market – explain the SSNIP test and the empirical approach to geographic markets.

Second part requires a discussion of dominance. Start by defining this concept (United Brands). That case laid down a ‘multi-factoral’ test including the competitive situation on the market, barriers to entry (likelihood of ‘potential competition’), and the characteristics of the company – its ability to act independently of competitive pressure. Explain what factors were taken into account in that case; then give examples from other cases (e.g. Hoffmann-La Roche).


Reflect and review







Ready to move on


Need to study again

I can explain the aims of EU competition policy.

I can explain the respective aims of Articles 101 and 102 TFEU and (ex Articles 81 EC and Article 82 EC).

I can define the concepts of undertaking, agreement and concerted practice.

I can list the requirements for a breach of Article 101 TFEU (ex Article 81 EC) and explain how the Commission and Court of Justice have interpreted these requirements in the case law.

I can apply the rules on agreements, concerted practices and decisions of associations to problem questions, and draw reasoned conclusions as to whether there is a breach of Article 101 TFEU (ex Article 81 EC).

I can explain the requirements for exemption under Article 101(3) TFEU (ex Article 81(3) EC) and under Commission Regulation 2790/99 on vertical restraints and advise on the availability of exemption for particular clauses in agreements.

I can outline the respective roles and powers of the Commission, General Court (ex the CFI), Court of Justice, national competition authorities and national courts in the enforcement of EU competition law under Council Regulation 1/2003.

I can explain the requirements for a breach of Article 102 TFEU (ex Article 82 EC).

I can explain the way in which the relevant market is defined for the purposes of EU competition law and apply this method to problem questions.

I can explain the concept of dominance and the factors used to decide whether dominance exists

I can explain the concept of abuse and give examples of the type of conduct which, when carried out by a dominant undertaking, is considered to constitute abuse under Article 102 TFEU (ex Article 82 EC).

I can identify examples of abuse in problem questions, state and apply the relevant legal tests.



Must revise

Revision done

11.1 A note on enforcement procedure up to 1 May 2004


11.3 Enforcement


12 Free movement of persons

Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 230

12.1 Scope of the rights to free movement . . . . . . . . . . . . . . . . . . 231

12.2 Nationality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 233

12.3 Equal treatment for workers and their families . . . . . . . . . . . . . 235

12.4 Grounds for refusal of entry or residence . . . . . . . . . . . . . . . . 243

12.5 Rights of free movement for non-economically active persons . . . . . 246

12.6 A purely internal situation . . . . . . . . . . . . . . . . . . . . . . . . 250

12.7 Directive 2004/38 on rights of Union citizens and their families . . . . . 253



Introduction

The free movement of persons is one of the four fundamental freedoms of European Union law, along with the free movement of goods, services and capital, and is one of the essential components of the internal market. The basic provisions set out in Articles 45, 49 and 56 TFEU (ex Articles 39, 43 and 49 EC) divide people into three ‘economic categories’.

Article 45 TFEU (ex Article 39 EC) – workers.

Article 49 TFEU (ex Article 43 EC) – self-employed people and companies (‘establishment’).

Article 56 TFEU (ex Article 49 EC) – people or companies providing services in another Member State.

Chapter 13 looks at establishment and services under Articles 49 TFEU (ex Article 43 EC) and 56 TFEU (ex Article 49 EC). Separate Directives were adopted setting out the rules for entry and residence depending on whether a person was employed (a ‘worker’), self-employed (‘established’) or providing services.

In the early 1990s, three Directives were adopted giving, for the first time, free movement rights to some categories of non-economically active people (Directive 90/365 for retired people, Directive 93/96 for students and Directive 90/364 on the general right of residence – for people with their own resources). People relying on these Directives have to be economically independent and have full insurance cover so as not to be a burden on the social security systems of the host state.

Finally, EU citizenship was introduced by the Maastricht Treaty in 1992 (in Articles 17–22 EC, now, Articles 18–24 TFEU). These Articles, however, were still ‘subject to the limitations and conditions laid down in [the] treaty and by the measures adopted to give it effect’ (Article (1) EC, now Article 21(1) TFEU). It appeared, therefore, that citizens still had to be economically self-supporting or in work. However, as we shall see, the citizenship Articles have been interpreted dynamically by the Court of Justice and recent legislation has pushed the concept well beyond those limits.

Essential reading Horspool and Humphreys, Chapter 12: ‘Citizenship and free movement of

persons: workers and establishment’, pp.385–44; Chapter 13: ‘Citizenship and free movement of persons: beyond economic links’, pp.445–469.

Craig and De Búrca, Chapter 21: ‘Free movement of workers and beyond’, pp.743–790; Chapter 23: ‘Citizenship of the European Union’, pp.847–873.

Learning outcomes By the end of this chapter and the relevant reading, you should be able to:

explain the rights of entry and residence for EU citizens working in a Member State other than their own

explain the rights of entry and residence of family members of EU citizens

explain the rights of job-seekers in another Member State

apply the principle of equal treatment with reference to the relevant secondary legislation and case law

explain the grounds on which Member States may refuse entry to, or expel, nationals of other Member States and their family members

write advice to clients setting out their free movement rights in hypothetical situations

demonstrate an understanding of the European Court’s role in enlarging the scope of free movement rights

Important note to studentsThe two chapters on free movement of persons (Chapters 12 and 13) should be studied together as they are often examined together.

EU Law 12 Free movement of persons page 231

compare the position of economically active people with that of non-economically active migrants

explain and critically evaluate the development of the rights conferred by EU citizenship and the changes introduced by Directive 2004/38 EC on citizenship and free movement.

12.1 Scope of the rights to free movement


persons: workers and establishment’, sections 12.1–12.16, pp.386–391; Chapter 13: ‘Citizenship and free movement of persons: beyond economic links’, sections 13.12–13.24, pp.454–455.

Craig and De Búrca, Chapter 21(1), (2), (3): ‘Free movement of workers’, pp.743–758.

All the separate Directives described in the introduction, relating to different categories of people, have now been replaced by a single Directive (Directive 2004/38). This Directive 2004/38 applies to all EU citizens and their families. However, the old differences between the rights of the economically active and the non-economically active have been incorporated into the Directive and will continue to apply, but only for the first five years of residence. After that time, a citizen and his or her family will acquire an unconditional right to live permanently in the host state on equal terms with nationals of that state.

In all cases, Member States can refuse entry or terminate the right to reside on grounds of public policy, public security or public health. The provisions of Directive 2004/38 are set out below in 12.5 and 12.6, with an explanation of the changes it introduces to the existing law. It replaces the previous ‘piecemeal’ approach to rules on free movement with a single Directive applying to all EU citizens and their families. However, because the Directive preserves existing differences in the status of economically active and non-economically active people for the first five years, it is still necessary to understand the existing law in relation to the separate categories.

12.1.1 Nationality Articles 45, 49 and 56 TFEU (ex Articles 39, 43 and 49 EC) apply only to nationals of the Member States. Some non-EU nationals are included, provided that they have a family relationship with a national of a Member State (only certain close relationships are covered), or possibly an employment relationship with a company registered in a Member State: see Case C-113/89 Rush Portuguesa Limitada v Office National de l’Immigration [1990] ECR 1417 (see Chapter 13).

Article 3(1) of Directive 2004/38 applies to Union citizens and their families. Article 2(1) defines a Union citizen as a person having the nationality of a Member State.

Nationality depends on each Member State’s own nationality laws.

In Case C-192/99 R v Sec of State for the Home Dept ex parte Kaur [2001] ECR I-1237, the Court of Justice confirmed that it is for each Member State to lay down the conditions for the acquisition. The definition of a UK national is laid down in the 1982 Declaration by the UK government on the definition of UK nationals.

12.1.2 Territories covered The European Economic Area Treaty (EEA) between the EU Member States and a number of Scandinavian states came into force on 1 January 1994. It extends Article 45, 49 and 56 TFEU (ex Articles 39, 43 and 49 EC) free movement rights to nationals of all EEA Member States (i.e. all the EU members plus Iceland, Liechtenstein and Norway).


The 2004 accession states

On 1 May 2004, ten new states joined the EU but the Accession Treaty allows for a transitional period of up to seven years during which existing Member States can restrict the entry of workers from the new Member States. Apart from the UK, Ireland and Sweden, all the existing members have exercised this option. It does not apply to workers from Malta or Greek Cyprus. It only applies to workers, not to service-providers, students or retired people.

When two more Member States, Bulgaria and Romania joined on 1 January 2007, the same restrictions were imposed on them as well; this time the UK, too, imposed limitations on entry.

Some of the new accession states have placed reciprocal limits on access to their territories for workers from other EU states, while some are allowing them immediate access.

Self-assessment questions 1. Name the three EEA Member States, the ten states that joined the EU on 1 May

2004 and the two states that joined on 1 January 2007.

2. What are the three categories of economically active people covered by Articles 45, 49 and 56 TFEU (ex Articles 39, 43 and 49 EC)?

3. What is the definition of a citizen of the EU?

Activity 12.1 Draw up a chart showing which Member States’ nationals have the immediate right to enter and work in which other Member States.


12.1.3 The impact of EU citizenship


persons: beyond economic links’, sections 13.1–13.19, pp.445–453.

Craig and De Búrca, Chapter 23: ‘Citizenship of the European Union’, pp.847–873.

Articles 17–22 EC, introduced by the Maastricht Treaty 1992, now Articles 20–24 TFEU.

Article 20 TFEU (ex Article 17(1) EC) confers the status of citizenship of the European Union on every person who holds the nationality of a Member State. EU citizenship is additional to, and does not replace, citizenship of the individual Member States.

Citizenship of the Union is not intended to extend the scope of the Treaty to purely internal situations which have no link with European Union law, but it may not actually be necessary for the citizen to have moved to another Member State for them to be covered by European Union rules. In Case C-148/02 Garcia Avello [2003] ECR I-12613, children living in Belgium but holding dual Spanish/Belgian nationality could claim European Union law rights under Article 20 TFEU (ex Article17 EC) and Article 18 TFEU (ex Article 12 EC), that is, not to be discriminated against, even though they had never resided in a Member State other than Belgium. See also the case of Chen, Section 12.7 below.

12.1.4 Is there a right to ‘move and reside freely’ in any Member State for all citizens of the Union? Article 21(1) TFEU (ex Article 18 (1) EC) provides ‘a right to move and reside freely throughout the territories of the Member States’ but this is stated to be ‘subject to limitations and conditions laid down in the Treaties and by the measures adopted to give them effect’.

Go to your study pack and read Ackermann, T. ‘Case C-148/02, Carlos Garcia Avello v Etat Belge, Judgment of the Full Court of 2 October 2003, [2003] ECR I-11613’, CMLRev 44:141-154, 2007.


It was established in R v Secretary of State for Home Dept, ex parte Vitale CA [1996] 2 CMLR 587 that Article 21(1) TFEU (ex Article 18(1) EC) did not create any additional residence rights beyond those that already existed. The ‘limitations and conditions on the right of residence in another Member State are designed to protect the Member State from ‘benefit tourism’. This is the central contradiction which runs through European Union law on free movement of persons: on the one hand it is a ‘fundamental freedom’, but, on the other hand, Member States have a legitimate interest in avoiding unlimited demands on their social security, health and education systems. The compromise is that migrants are required either to be economically active or to have sufficient independent resources to support themselves and their families.

As with all the fundamental freedoms, rights must be interpreted broadly, and any restrictions must be interpreted narrowly and in accordance with the principle of proportionality and fundamental human rights.

A very significant change brought in by Article 16 of Directive 2004/38 is that, after five years of continuous lawful residence in the host state, EU citizens and their family members will acquire a ‘right of permanent residence’. Any previous ‘limitations and restrictions’ will no longer apply to them and they will be entitled to equal treatment with nationals. The right of permanent residence will only be lost if the person leaves the host state for more than two years.

For the five years until the entitlement to permanent residence is attained, however, there will still be differences between the rights of economically active migrants and those not economically active. These will be examined below.

12.2 Nationality

Rights of free movement under Articles 45, 49 and 56 TFEU (ex Articles 39, 43 and 49 EC) are granted only to nationals of the Member States. Article 45 TFEU (ex Article 39 EC) does not actually say that a worker must be a national of a Member State, while Articles 49 and 56 TFEU (ex Articles 43 and 49 EC) expressly state this. Regulation 1612/68, implementing Article 45 TFEU (ex Article 39 EC), made clear that it applies only to ‘workers who are nationals of the Member States’.

12.2.2 Who is a ‘worker’? Article 45 TFEU (ex Article 39 EC) does not define the concept of ‘worker’ but the Court of Justice has held that it has a ‘community’ meaning and cannot be defined by individual Member States. If each state could define a worker in terms of its own minimum threshold such as number of hours worked or earning a minimum wage, then the rights would vary from one state to another. Instead the Court has held that it is only necessary to show that the work amounts to an ‘effective and genuine economic activity’ as opposed to one which is purely ‘marginal and ancillary’: see Case 53/81 Levin v Staatssecretaris van Justitie [1982] ECR 1035. Mrs Levin’s work as a chambermaid in a hotel could not be disregarded merely because it was part-time. Nor was it relevant that she deliberately took the job in order to get European Union law rights of residence for herself and her (non-European Union) partner.

The essential characteristics of a worker were stated by the Court in Case 66/85 Lawrie-Blum v Land Baden-Württemberg [1986] ECR 2121. They are: the performance of services, for or under the direction of another, in return for remuneration during a certain period of time.

In Case 139/85 Kempf v Staatssecretaris van Justitie [1986] ECR 1741, a part-time piano teacher whose work had been accepted by the referring national court as being an ‘effective and genuine economic activity’, was held by the European Court to be a worker. The fact that he earned less than the minimum wage was not relevant: as a worker he was entitled to receive supplementary benefit.

A more recent case is a further illustration: Case C-10/05 Cynthia Mattern and Hajrudin Cikotic v Ministre du Travail et de l’Emploi [2006] ECR I-3145. Ms Mattern had completed a professional training period as a care assistant in a host Member State. The Court

Go to your study pack and read the extract from Case 53/81 D. M. Levin v Staatssecretaris van Justitie.

Go to your study pack and read the extract from Case 66/85 Deborah Lawrie-Blum v Land Baden-Württemberg.

Go to your study pack and read the extract from Case 139/85 R. H. Kempf v Staatssecretaris van Justitie.


found that according to settled case law, the fact that the training period may be regarded as practical preparation directly related to the actual pursuit of the occupation in point, is not a bar to the application of Article 45 TFEU (ex Article 39 EC), if the training period is completed under the conditions of genuine and effective activity as an employed person (see Lawrie-Blum, above). Furthermore, while it is clear that remuneration for services performed constitutes an essential feature of an employment relationship, the fact remains that neither the origin of the funds from which the remuneration is paid, nor the limited amount of that remuneration, can have any consequence in regard to whether or not the person is a worker for the purposes of European Union law. Referring to Article 11 of Regulation 1612/68, which grants the right of family members of employed or self-employed European Union workers to join their family within the Union, the Court noted that Ms Mattern was to be classed as a worker for the purposes of European Union law.

‘Remuneration’ was broadly interpreted in Case C-196/87 Steymann [1988] ECR 6159 to include ‘keep’ and pocket money paid to a member of a religious community.

The Court stated, however, in Case 344/87 Bettray [1989] ECR 1621, that if the primary purpose of the work was ‘social employment’ (i.e. subsidised, non-economic work by persons who are unable to take up employment under normal conditions – in this case a drug rehabilitation scheme) it would not constitute genuine and effective economic activity.

In Case C-357/89 Raulin v Minister van Onderwijs en Wetenschappen [1992] ECR I-1027, Raulin’s contract as a waitress provided no guarantee as to the number of hours to be worked, nor was she obliged to heed the employer’s call for her to work. She was paid only for hours actually worked. The Court said that even an ‘on-call contract’ such as this may fulfil the test for a ‘worker’, but, in deciding whether the test was fulfilled in a given case, the national court may take into account the irregular nature and limited duration of the contract.

12.2.3 The job-seeker Article 45(3) TFEU (ex Article 39(3) EC) provides the right ‘to accept offers of employment actually made’, suggesting that a person must already have a job offer before travelling to another Member State.

The Court has, however, given a purposive, rather than a literal, interpretation of Article 45 TFEU (ex Article 39 EC) in this respect. The purpose of Article 45 TFEU (ex Article 39 EC) was to encourage nationals of the Member States to move to work in other Member States and this purpose would be defeated if people could not go to look for work.

A person cannot stay indefinitely in another Member State looking for work. However the Court said in Case C-292/89 Antonissen [1991] ECR I-745 that Member States must allow a ‘reasonable period’. This varies between three and six months depending on the Member State. Article 6 of Directive 2004/38 provides a right of residence for up to three months for EU citizens and their families with no conditions attached other than possession of ID card or passport.

In Antonissen, the Court said that the six months allowed by the UK was reasonable, but held that the expiry of that time-limit did not give a Member State the automatic right to deport work-seekers. If they could show that they were actively seeking work, and had a genuine chance of success, they must be allowed to stay. This rule is now incorporated into Article 14(4)(b) of Directive 2004/38 which precludes expulsion of a job-seeker or family member at the end of the three-month period laid down in Article 6 if they are still seeking work and have a genuine chance of finding it.

However there is no right to benefits during this period: recital 21 of the preamble to Directive 2004/38 explains that it will be left to Member States to decide whether social security benefits will be available during the three-month period – or longer in the case of job-seekers staying more than three months. Article 24(2) of the Directive confirms that Member States are under no obligation to provide benefits during these periods.

Go to your study pack and read the extract from Case 196/87 Udo Steymann v Staatssecretaris van Justitie and Case 344/87 I. Bettray v Staatssecretaris van Justitie.

Go to your study pack and read the extract from Case C-292/89 The Queen v Immigration Appeal Tribunal, ex parte Gustaff Desiderius Antonissen.


There is a potential conflict between Article 24(2) and Article 14(4)(b): the latter says a Member State can never expel a work-seeker who is continuing to seek work and has a genuine chance of finding it, but at the same time Article 24(2) gives no right to any benefits. This position also conflicts with recent case law on the rights of work-seekers (see Collins below).

Activity 12.2 a. Explain why the term ‘worker’ is defined by European Union, not national, law.

b. Examine the Court’s reasoning in Case 53/81 Levin justifying its application of Article 45 TFEU (ex Article 39 EC) to part-time workers. Does it rely on a literal or a purposive interpretation of the Treaty and secondary legislation?

c. State the test to be used by a national court to decide whether a person is a ‘worker’ for the purposes of European Union law.

d. How do the rights of work-seekers differ from those in employment?

e. Peter, an unemployed car mechanic, left his native London seven months ago to seek work in Italy. He failed to find employment and has been spending most of his time hitch-hiking round Italy. He hopes to find work in the summer with a car-hire company. The Italian authorities have ordered him to leave because he is not a ‘worker’ for the purposes of European Union law.

What would Peter have to show in order to claim a continuing right to reside in Italy under Article 45 TFEU (ex Article 39 EC) and Directive 2004/38?

12.3 Equal treatment for workers and their families


persons: workers and establishment’, sections 12.30–12.36, pp.396–400.

Craig and De Búrca, Chapter 21(6): ‘The Right of Entry and Residence of Workers and their Families: Directive 2004/38’, pp.770–774; Chapter 23(5): ‘Directive 2004/38 on the Rights of Free Movement and Residence for EU Citizens and their Families’, pp.870–872.

Council Regulation 1612/68, in particular Articles 3, 7, 8, 9 and 12. (Articles 10 and 11 have been replaced by Directive 2004/38 (the Regulation applies to migrant workers and their families). The remaining provisions of the Regulation are unaffected.)

12.3.1 Access to employment Migrant workers are entitled to equal access to employment with nationals of the host state, and there must be no discrimination in recruitment. The only exceptions to the principle of equal access are laid down in Article 45(4) TFEU (ex Article 39(4) EC), dealing with employment in the public service (see Section 12.3.2 below), and Article 3(1) of Regulation 1612/68, which covers recruitment conditions relating to ‘linguistic knowledge required by reason of the nature of the job to be filled’.

In Case 379/87 Groener v Minister of Education [1989] ECR 3967, the Court made clear that the level of linguistic knowledge must be proportionate (i.e. it must relate to the actual demands of the job and not be set too high).

Family members are also entitled to take up employment (Article 23 of Directive 2004/38).

Access to employment must not be restricted by ‘indirectly discriminatory’ requirements: see Case 281/98 Angonese [2000] All ER (EC) 577: a private bank in Italy advertised some posts specifying that applicants must possess a ‘patentito’ which was a certificate confirming that the holder was bi-lingual in German and Italian. This certificate was issued exclusively by the local Authorities of Bolzano (Bozen) which


is in the German-speaking part of Northern Italy where both German and Italian are spoken and have equal rights. Mr Angonese, an Italian, was bi-lingual but did not possess the certificate and was not allowed to take part in the competition. It was held that this was discriminatory and contrary to Article 45 TFEU (ex Article 39 EC) as it was unlikely that persons from another locality would possess the ‘patentito’.

In Case C-40/05 Kaj Lyyski v Umeå Universitet [2007] ECR I-99, Mr Lyyski, in applying for a teacher training course in Sweden, indicated on his application form that he intended to carry out the practical training part of the course in a Swedish-speaking school in Finland. His application was rejected on the grounds that as he was not employed in a Swedish school, he could not prove that he was eligible for the scheme. Citing Gravier (see 12.3.9) the Court stated that the conditions of access to vocational training fell within the scope of the EU Treaties, and that both higher education and university education fall under the category of ‘vocational training’. Reiterating Article 45(1) TFEU (ex Article 39(1) EC), the Court stated that any European Union national who, regardless of their place of residence and nationality, has exercised their right to freedom of movement and who has been employed in a Member State other than that of residence, falls within the scope of that Article. The Court found that the provisions of the training scheme did constitute an infringement on the exercise of the right to freedom of movement under Article 45 TFEU (ex Article 39 EC), and could be justified only by reference to legitimate aims and pressing issues of public interest. The Court agreed with Sweden that assessment of the teaching skills of a trainee teacher are manifestly more difficult when the teacher is undertaking training in another Member State. It could therefore not be excluded that the manner in which the training regulations were applied went beyond what was necessary to achieve the objective of preserving and improving the Swedish education system. Thus, such an exclusion was justifiable, as long as this was not evidence of exclusion ‘as a matter of principle’, or a ‘blanket ban’.

12.3.2 The public service exception Under Article 45(4) TFEU (ex Article 39(4) EC), Member States can restrict access for non-nationals to ‘employment in the public service’. The Court has defined ‘public service’ narrowly. It is a question of the nature of the post, not the institution which is the employer. In Case 149/79 Commission v Belgium [1980] ECR 3881, Belgium was treating all posts within the public sector (nurses, teachers, railway workers etc.) as reserved for nationals under Article 45(4) TFEU (ex Article 39(4) EC). The Court rejected this approach and held that posts covered by the Article must involve participation in the exercise of powers conferred by public law and must entail duties designed to safeguard the general interests of the state. They ‘presume... the existence of a special relationship of allegiance to the State and reciprocity of rights and duties which form the foundation of the bond of nationality’.

Some cases which illustrate the Court’s narrow approach to Article 45(4) TFEU (ex Article 39(4) EC):

In Case 152/73 Sotgiu v Deutsche Bundespost [1974] ECR 153, employment in the state postal service was held not to be covered by Article 45(4) TFEU (ex Article 39(4) EC).

In Case 66/85 Lawrie-Blum v Land Baden-Württemberg [1986] ECR 2121 (see 12.2.2), access to a teacher training scheme which was part of the civil service was not covered by Article 45(4) TFEU (ex Article 39(4) EC).

In Case 307/84 Commission v France [1986] ECR 1725, nursing posts in state hospitals were not covered.

Activity 12.3†

Françoise, a French national, has been refused a job as a trainee teacher by the Belgian Education Board on the grounds that such posts are reserved for Belgian nationals. There is also a requirement that all teachers in Belgian primary schools speak Flemish (Dutch).

Advise Françoise.

Go to your study pack and read the extract from Case 152/73 Giovanni Maria Sotgiu v Deutsche Bundespost.

† Language is a controversial issue in Belgium. Belgium has three official languages, French, Dutch (Flemish) and German. Most of the country is divided into French-speaking or Flemish-speaking areas. Use of the ‘wrong’ language can lead to both official and social pressures.


12.3.3 Access to social and other benefitsArticle 7(1) of Regulation 1612/68 states that the migrant worker must not be discriminated against ‘in respect of any conditions of employment and work, in particular as regards remuneration, dismissal, and should he become unemployed, reinstatement or reemployment’.

Equal treatment with nationals more generally is required by Article 7(2) which says that the worker ‘shall enjoy the same social and tax advantages as national workers’.

12.3.4 The meaning of ‘social advantage’ Although Article 7(2) refers only to workers, the Court has interpreted it to include benefits to family members of the worker. See Case 32/75 Cristini v SNCF [1975] ECR 1085; [1975] 1 CMLR 573. It held that it includes benefits which have nothing to do with the contract of employment itself (in this case, a family railcard).

In Case-85/96 Martínez Sala v Freistaat Bayern [1998] ECR I-2691, (for the facts of this case, see 12.5.2) the Court defined social advantage as including:

all the advantages, which, whether or not linked to a contract of employment, are generally granted to national workers… as workers… or by virtue of the mere fact of their residence on the national territory (paragraph 25 of the judgment).

So even a non-contributory child-raising allowance which was payable to non-workers and part-time workers was covered.

12.3.5 Residence requirements Any conditions for access to benefits which might indirectly discriminate against non-nationals, such as a requirement for a period of residence, would also infringe Article 7(2) of the Regulation. In Case C-299/01 Commission v Luxembourg, [2002] ECR I-5899, making entitlement to income support dependent on a person having resided in Luxembourg for five years out of the past 20 years was held to breach Article 45 TFEU (ex Article 39EC) and Regulation 1612/68 Article 7(2). In Case C-192/05 Tas-Hagen & Tas v Raadskamer WUBO van de Pensioen- en Uitkeringsraad [2006] ECR I- 10451 Mrs Tas-Hagen, a Dutch national resident in Spain and incapable of working, applied for a civilian war pension from the Netherlands. Mr Tas, also a Dutch national resident in Spain and incapable of work, also applied for the civilian war pension. Both applications were denied on the basis that the applicants were not resident in the Netherlands at the time of the application. They both appealed against this decision. The Court stated first of all that under Article 21 TFEU (ex Article 18 EC), as Union citizens, the applicants were given rights and duties in accordance with that Article, in particular, the right to move and reside freely within the territory of the Member States. The Court duly noted that while the benefit at issue was within the competence of Member States and was not covered by European Union law, Member States must exercise that competence in accordance with European Union law. The Court found that the residence requirement therefore constituted a restriction on the freedom of movement and could only be justified by reference to ‘objective considerations of public interest independent of the nationality of the persons concerned and is proportionate to the legitimate objective of the national provisions’. Accordingly, the residence requirement was determined not to be proportionate to the objective of evaluating an applicant’s ties with the Netherlands and therefore constituted an obstacle to the free movement of persons under Article 21 TFEU (ex Article 18 EC).

However, in the following case, the Court came to the conclusion that a residence requirement could be justified. In Case C-406/04 De Cuyper [2006] ECR I-6947 Mr De Cuyper, a Belgian national, was granted unemployment allowance in Belgium. In receiving the allowance, he declared that he was living alone and living in Belgium. During the course of a routine check, the applicant admitted that he had been living in France and returning to Belgium every three months. The allowance was then suspended and Mr De Cuyper appealed. The Court found that the benefit in question was indeed an unemployment allowance falling within Regulation 1408/71, even


though the recipient was not required to sign on or be available for work. Under Article 21 TFEU (ex Article 18 EC), the right to free movement and residence within the territory of the Member States of Union citizens is guaranteed. The residence requirement placed on the unemployment benefit by the Belgian authorities clearly infringed this right. However, the Court noted that such a restriction can be justified, if it is based on objective considerations of public interest independent of the nationality of the persons concerned and proportionate to the legitimate objectives of the national provisions. Furthermore, the Court stated that ‘a measure is proportionate when, while appropriate for securing the attainment of the objective pursued, it does not go beyond what is necessary in order to attain it’. The Belgian authorities argued that the residence requirement was necessary in order for inspectors to monitor the status of benefit claimants and that this would be impossible if claimants lived in other Member States. The Court agreed that less restrictive monitoring practices would not have been capable of achieving the objective pursued and that the residence requirement was therefore justified.

Not all benefits will be covered, however. In Case C-386/02 Joseph Baldinger [2004] ECR I-8411 Austria was entitled to make a benefit for former prisoners of war dependent on applicants being Austrian nationals at the time of application. This was because it was not a social advantage under Article 7(2) of Regulation 1612/68, available generally to Austrian nationals, but it was a benefit for war victims only. As Mr Baldinger had taken Swedish nationality, he was not entitled to the benefit.

See also Article 24(1) of Directive 2004/38 on Equal Treatment for EU citizens and their families.

12.3.6 Are job-seekers entitled to equal treatment? As seen in 12.2.3 above, this is one of the more controversial issues in free movement law – and one which is still not resolved by Directive 2004/38.

Case 316/85 Lebon [1987] ECR 2812

In Lebon the Court said that the job-seeker does not enjoy the same rights as the worker and that, except for the provisions on equal access to employment, Regulation 1612/68 did not apply to job-seekers. It held that entitlement to the same social and tax advantages as nationals under Article 7(2) of Regulation 1612/68 did not apply to the job-seeker in this case.

However, a recent line of cases on the rights attaching to EU citizenship cast doubt on the earlier case law restricting access to benefits.

Case C 138/02 Collins [2004] ECR I-2703

A job-seeker who held dual nationality (Irish and American) was refused the job-seeker’s allowance while he was looking for work in the UK. This was in line with the Lebon approach whereby job-seekers are only covered by the provisions on equal access to employment, and are not entitled to social and tax advantages under Article 7(2). However, the Court said that, in the light of the establishment of EU citizenship under Article 20 TFEU (ex Article 17 EC) and of recent case law on the right to equal treatment for citizens (see 12.5.2 below) ‘it is no longer possible to exclude from the scope of Article 48(2) of the Treaty [pre-Amsterdam numbering, now 45(2) TFEU]… a benefit of a financial nature intended to facilitate access to employment in the labour market of a Member State’ (paragraph 63).

The Court said that these developments in the law (citizenship) meant that the Lebon approach was no longer appropriate to such a benefit.

Go to your study pack and read the extract from Case C-138/02 Brian Francis Collins v Secretary of State for Work and Pensions.


In a case that followed on from Collins, the Court interpreted Regulation 1408/71, which provided that a Member State could require Union citizens to complete a certain period of work within the host Member State before allowing them to claim unemployment benefit. It is interesting to compare the conclusion in this case with the legislative line taken in Directive 2004/38.

Case C-346/05 Monique Chateignier v Office National de l’Emploi (ONEM) [2006] ECR I-10951

Mrs Chateignier, a French national, married a Belgian national and went to live in Belgium. After declaring to the Belgian authorities that she had Belgian nationality, the applicant received unemployment benefit. Following a subsequent declaration of French nationality by the applicant, and an investigation by Belgian authorities which confirmed she did not hold Belgian nationality, unemployment benefits were withdrawn on the basis that she had not completed one day’s work in Belgium. The applicant then completed one day of work, and re-applied for unemployment benefits, which were re-granted. The Court noted that implicit in the applicant’s claim for benefits was a declaration that she was seeking employment, and that the benefits at issue were unemployment benefits within the scope of Regulation 1408/71. As a national of a Member State seeking employment in another Member State, the applicant fell under Article 45 TFEU (ex Article 39 EC) and was therefore entitled to equal treatment with nationals of the host Member State. The inclusion of the applicant’s nationality meant that she was placed in a disadvantageous position, and this was precluded by Article 45 TFEU (ex Article 39 EC). Interestingly, the Court noted that Articles 67(2) and (3) of Regulation 1408/71 permitted Member States to make the acquisition, retention or recovery of the right to unemployment benefits subject to the completion of periods of employment in accordance with provisions of the legislation under which such benefits are claimed. However, no such requirement had been incorporated in Belgian legislation, meaning that no such period could be required by that State.

Case C-456/02 Trojani [2004]

Trojani, a French national, did odd jobs in a Salvation Army hostel in Belgium as part of a ‘personal socio-occupational reintegration scheme’. It was for the national court to decide whether he was a ‘worker’ under Article 45 TFEU (ex Article 39EC), but even if he was not, the Court said that as he was an EU citizen lawfully resident in Belgium, he could not be discriminated against in access to the minimex subsistence allowance. The Court made clear that if he had no right of residence, then the Member State would be entitled to deport him, but if it did not do so, it must grant him equal treatment.

12.3.7 Equal treatment for job-seekers under Directive 2004/38 While in Collins, decided in March 2004, the Court of Justice was clearly moving in the direction of holding that job-seekers are entitled to social security benefits, the new Directive 2004/38, adopted on 29 April that same year heads in the opposite direction. It provides in Article 24(2) that: ‘the host Member State shall not be obliged to confer entitlement to social assistance during the first three months of residence or, where appropriate, the longer period provided [for job-seekers]…’

Until the right of permanent residence is acquired, only workers, self-employed and their families are entitled to grants or loans for study, including vocational courses (Article 24(2)).

These are examples of the contradiction mentioned earlier between the rights of EU citizens not to be discriminated against – and the desire of Member States to limit claims on their public purse.

Go to your study pack and read Oosterom-Staples, H. ‘Case C-138/02, Brian Francis Collins v Secretary of State for Work and Pensions, Judgment of 23 March 2004, Full Court’, CMLRev 42:205-223, 2005).


12.3.8 Application of Article 45 TFEU (ex Article EC) to ‘indistinctly applicable’ rules † Article 45(2) TFEU (ex Article 39(2) EC) prohibits any discrimination against migrant workers, but the Court has held that even rules which apply to both nationals and non-nationals can breach Article 45 TFEU (ex Article 39 EC) where they affect access to employment in another Member State. In Case C-415/93 Union Royale Belge des Sociétés de Football Association ASBL v Jean-Marc Bosman [1995] ECR I-4921, [1996] 1 CMLR 645, Mr Bosman successfully argued that the UEFA transfer rules hindered him from transferring to play for another club. The rules affected transfer to another club whether in the same Member State or in a different Member State, and affected all players: they were non-discriminatory. Nonetheless the Court held, echoing language familiar in the context of the free movement of goods, that the rules were capable of hindering access to employment in another Member State and would be caught by Article 45 TFEU (ex Article 39EC) unless objectively justified and proportionate.

This application of a ‘hindrance of access’ rather than a discrimination test characterises the Court’s approach, now, to all the fundamental freedoms. As Advocate General Lenz stated in his Opinion in Bosman (paragraph 200):

…in examining the compatibility of national provisions with the provisions of Community law on the fundamental freedoms, it is not so important which specific fundamental freedom a particular factual situation is to be measured against. What should be decisive is rather whether the provisions in question hinder trans-frontier economic activity and – if that is the case – whether those restrictions are justified.

This approach was applied in C-109/04 Kranemann [2005] ECR I-2421, where part of the prescribed training for lawyers in Germany involved a practical placement for which trainees received a subsistence allowance and were reimbursed their travel expenses to the placement. Kranemann decided to do his placement in the UK but was only reimbursed for travel within Germany – as far as the border! The Court held that he was covered by Article 45 TFEU (ex Article 39 EC), as the training was essential for access to employment in the judiciary, and it was an effective and genuine economic activity. The amount of remuneration did not affect this. Citing Bosman, the Court held that:

Provisions which preclude or deter a national of a Member State from leaving his country of origin in order to exercise his right to freedom of movement therefore constitute an obstacle to that freedom even if without regard to the nationality of the workers concerned.

12.3.9 Access to education and training


persons: workers and establishment’, sections 12.41, p.402 and sections 12.113–12.123, pp.435–441

Craig and De Búrca, Chapter 21(7): ‘Substantive rights and social advantages: Regulation 1612/68’, pp.774–783.

Education rights of the European Union worker are provided by Article 7(3) of Regulation 1612/68 and are limited to ‘vocational schools and retraining centres’. The rights to education of workers and children of workers has been extended far beyond this, both through the Court of Justice’s case law and through the addition (in the Maastricht Treaty), of Articles 149 and 150 EC, now Articles 165 and 166 TFEU, on Education, Vocational Training and Youth. ‘Vocational training’ was widely defined by the Court in Case 293/83 Gravier v City of Liege [1985] ECR 593 as including any form of education which prepares for any profession, trade or employment, or develops the necessary skills for any trade, profession or employment. This is wide enough to cover most university courses as well as purely vocational courses. The concept was further extended in Case 24/86 Blaizot v City of Liège [1988] ECR 379.

† While Article 7(2) of Regulation 1612/68 only applies to workers, the same principle applies to the self-employed and to service providers as a result of Article 12 EC which prohibits discrimination as to nationality generally within the scope of the Treaty.


In Case 39/86 Lair v University of Hannover [1988] ECR 3161 the Court held that Article 7(2) of Regulation 1612/68 also applied and conferred a right to the same social and tax advantages in relation to training, such as financial support. A university course could be covered as long as there was some link between the course and the work the person had been doing. The need for a link is designed to ensure potential students do not simply come and take a job for a brief period in order then to obtain equal rights with nationals to student maintenance funding: see Case 197/86 Brown v Secretary of State for Scotland [1988] ECR 3205 and Case 235/87 Matteucci [1988] ECR 5589. This line of case law is embodied in Article 7(3)(d) of Directive 2004/38, which states that a person retains the status of worker or self-employed person (and therefore full rights to equal treatment) if he or she embarks on vocational training, but it must be related to their previous employment unless they are ‘involuntarily unemployed’. Article 24(2) of the Directive confirms that maintenance aid for studies is available to people who retain the status of worker.

Education rights of the child of a migrant worker are laid down in Article 12 of Regulation 1612/68 and apply to a child who has lived with at least one parent in the host state while that parent ‘resided there as a worker’ (see paragraph 30 of Brown, above). Children of workers and self-employed are entitled not only to access to all education and training establishment in the host state, but also to all grants, loans and other support which would be available to children of nationals: Case 9/74 Casagrande [1974] ECR 773 (and now Article 24(2) of Directive 2004/38).

This includes funding to study abroad if this would be available to the host state’s nationals, even if used to study in the child’s home state! See: Case C-308/89 Carmina di Leo v Land Berlin [1990] ECR I-4185.

Even if the parent(s) of the child are no longer resident in the host state, the child continues to be entitled to education and financial support on the same terms as children of nationals (Case C-390/87 Echternach [1989] ECR 723), and this right does not cease at the age of 21: see Case C-7/94 Gaal [1996] ECR I-1031. Article 12(3) of Directive 2004/38 deals with the Echternach situation: children in education retain the right to reside even if the EU national parent has left or died, as does the parent who has custody of them, regardless of nationality, until their education is completed (see also Baumbast, below).

12.3.10 Education rights of other family members These are not expressly provided for in the Regulation. In case 152/82 Forcheri v Belgium [1983] ECR 2323, the wife of an Italian migrant worker could not be charged an enrolment fee which was not payable by nationals. The Court of Justice based its decision on the fact that vocational training policy is within the scope of the Treaty (under Article 166 TFEU, ex Article 50 EC) so the principle of non-discrimination in Article 18 TFEU (ex Article 12 EC) applied.

Financial support for other family members is not covered by this decision but may be covered by Article 7(2) of Regulation 1612/68 as it could be argued that it would be of indirect benefit to the worker (cf Lebon).

Case 147/03 Commission v Austria [2005] ECR I-5969

Legislation in Austria required students who had completed their secondary education in other Member States, and who wished to study in Austrian universities, not only to produce their secondary school diploma but also to prove that they met the specific requirements governing access to the chosen course in the state where they had received their qualifications. This was held to be indirect discrimination since it laid down more onerous conditions for access to university courses than those required for home students and was contrary to Article 18 TFEU (ex Article 12 EC).

The Court of Justice stated that this area fell within the scope of European Union law under Article 165 TFEU (ex Article 149 EC) (which incorporates education within the competence of the EC and specifically requires the encouragement of mobility of students and teachers, inter alia by encouraging the academic recognition of diplomas and periods of study) and Article 166 TFEU (ex Article 150 EC), on vocational

Go to your study pack and read the extract from Case 197/86 Steven Malcolm Brown v The Secretary of State for Scotland.


training. The Court did not accept Austria’s objective justifications for the indirect discrimination.

Austria was therefore held to be in breach of its European Union law obligations under Articles 18 and 56 TFEU (ex Articles 12 and 49 EC).

Case C-209/03 The Queen (on the application of Dany Bidar) v London Borough of Ealing and Secretary of State for Education [2005] ECR I-2119.

In this important case, the Court of Justice distinguished its earlier case law (Lair, Brown), which had established that maintenance grants for students were not within the scope of EC law. The Court stated that, since those cases were decided, the TEU had introduced Citizenship of the European Union and had also added a new title (now Title XI) on Education and Vocational Training. This is confirmed by the reference to maintenance grants in paragraph 2 of Article 24 of Directive 2004/38.

Consequently, reading Article 12 EC in conjunction with Article 18 EC (now Articles 18 and 21 TFEU), the Court held that:

Assistance, whether in the form of subsidised loans or of grants, provided to students lawfully resident in the host Member State to cover their maintenance costs falls within the scope of application of the EC Treaty for the purposes of the prohibition of discrimination laid down in the first paragraph of Article 12 EC.

The case concerned Dany Bidar, a French national, who had moved to the UK in 1998 with his mother. He enrolled at University College London after having completed three years of secondary education in the UK. The Court of Justice held that it was permissible for Member States to have rules which prevented the grant of maintenance assistance to students from other Member States from becoming an unreasonable burden on the host state, and therefore ‘to grant such assistance only to students who have demonstrated a certain degree of integration into the society of that state’.

However, the UK regulations governing the grant of maintenance loans not only laid down a requirement that those qualifying must have been resident in the UK for three years (which Mr Bidar fulfilled), but also required that an applicant for a maintenance loan must be ‘settled’ in the UK. This requirement was designed to prevent a national from another Member State from qualifying for a loan.

The Court of Justice held that rules which precluded any possibility of a national of another Member State obtaining ‘settled’ status as a student could not be justified by the legitimate objective which the rules sought to secure, because they made it ‘impossible for such a national, whatever his actual degree of integration into the society of the host Member State, to satisfy that condition and hence to enjoy the right to assistance to cover his maintenance costs’.

The rules prevented ‘a student who is a national of another Member State and who is lawfully resident and has received a substantial part of his secondary education in the host Member State, and has consequently established a genuine link with the society of the latter State, from being able to pursue his studies under the same conditions as a student who is a national of that State and is in the same situation’. They were therefore contrary to Article 12 EC, now Article 18 TFEU.

The Court of Justice ruled that the first paragraph of Article 12 EC, now Article 18 TFEU, must be interpreted as precluding national legislation which grants students the right to assistance covering their maintenance costs only if they are settled in the host Member State, while precluding a national of another Member State from obtaining the status of a settled person as a student even if that national is lawfully resident and has received a substantial part of his secondary education in the host Member State and has consequently established a genuine link with the society of that State. The Court refused to limit the temporal effects of the judgment.

See also Case C-184/99 Grzelczyk v Centre Public d’Aide Sociale [2001] ECR I-6193, discussed below, at 12.5.3.


Activity 12.4 What advice would you give in the following situations:

a. Amir, a British national, has been working as a builder in Germany for two months but, following a downturn in demand, his working hours have been reduced to part-time. His wages have fallen below the German minimum subsistence level but he has been told that he is not entitled to social security benefits as he is not a German national.

b. Francesca, who is Argentinian, is the wife of a Spanish architect working in London. Although the couple are now separated, Francesca wishes to remain in London and has applied for an Access Course at the local College. She has been charged the foreign student fee for the course, which is three times the amount payable by home students.

12.4 Grounds for refusal of entry or residence


persons: workers and establishment’, sections 12.17–12.23, pp.391–394 and sections 12.71–12.81, pp.414–419.

Craig and De Búrca, Chapter 21: ‘Free movement of workers’, pp.743–790.

Directive 2004/38, Chapter VI.

Article 45(3) TFEU (ex Article 39(3) EC) lists three possible grounds for refusing entry to, or expelling, a national of another Member State: public health, public security or public policy. Articles 52 and 62 TFEU (ex Articles 46 and 55 EC) apply the same grounds in relation to the self-employed and providers of services. Until 2006, Council Directive 64/221 dealt with the application of the grounds of derogation and provided procedural protection for the individuals concerned. From 1 May 2006, Articles 27–33 (Chapter VI) of Directive 2004/38 replaced Directive 64/221. These provisions incorporate the provisions of Directive 64/221 and take into account the abundant Court of Justice case law which had grown up. These provisions are explained here, highlighting the changes they introduce. The cases so far are all based on Directive 64/221 and reference will be made to the provisions in that Directive. The provisions of the new Directive are explained below, highlighting the differences.

12.4.1 Article 27 Directive 2004/38: General principles Article 27(1) provides that these grounds must not be used to serve economic ends.

Article 27(4) requires the Member State of origin of a person expelled on one of these grounds to re-admit them to their country of origin, even if their passport has expired or their nationality is in dispute.

12.4.2 Public health Directive 64/221 listed diseases or disabilities justifying refusal of entry or refusal to issue a first residence permit in an Annex to the Directive. That list included infectious diseases like syphilis and tuberculosis (but did not include HIV/AIDS) and conditions which may affect public security or public policy such as drug addiction or severe mental disturbance.

The development of one of these diseases or conditions after obtaining a first residence permit would not justify refusal to renew the permit, or expulsion. The new regime is set out in Article 29 of Directive 2004/38 and the approach is quite different. Rather than listing a specific set of diseases, Article 29(1) identifies two public health situations which may justify restrictions on free movement:


‘diseases with epidemic potential’, recognised as such by the World Health Organisation (WHO)

other infectious or contagious diseases but only if restrictions are also being imposed on nationals of the host state suffering from these conditions.

If the disease occurs after three months from the date of arrival, the sufferer cannot be expelled on this ground (Article 29(2)). Article 29(3) allows Member States to require a medical examination within three months of arrival to check whether a person is suffering from a proscribed disease, but ONLY if there are ‘serious indications’ that it is necessary, and not as a matter of routine.

12.4.3 Public policy and public security The Court has interpreted these derogations from the fundamental right of free movement as strictly and narrowly as possible.

Member States may not ban whole categories of people: Article 27(2) of the Directive states that any refusal of entry or expulsion must comply with the principle of proportionality, and ‘be based exclusively on the personal conduct of the individual concerned’.

In Case 41/74 van Duyn v Home Office [1974] ECR 1337, the Court said that current (not past) membership of an organisation could amount to ‘personal conduct’ where membership ‘reflects participation as well as identification with its aims and designs’.

The interpretation of the public policy derogation requires Member States to show that they are taking similar deterrent measures against their own nationals in similar circumstances, even if the activity is not illegal. See Case 125/126/81, Adoui and Cornuaille v Belgian State [1982] ECR 1665, where the Court said that if a Member State did not adopt genuine and effective measures to combat an activity, even if not illegal, it could not justify expulsion of other Member States’ nationals.

12.4.4 Relevance of previous criminal convictions Article 27(2) of the Directive states that ‘previous criminal convictions shall not of themselves constitute grounds’ for exclusion or expulsion.

This does not mean that criminal convictions can never be relevant, but it will depend on the gravity of the offence and whether the individual poses a continuing threat (i.e. is likely to re-offend), see Case 67/74 Bonsignore [1975] ECR 297.

The test for personal conduct justifying expulsion/refusal of entry was formulated in Case 30/77 R v Bouchereau [1977] ECR 1999; 2 CMLR 800 and has been incorporated into Article 27(2). There must be ‘a genuine, present and sufficiently serious threat affecting one of the fundamental interests of society’.

A completely new set of provisions introduced by Directive 2004/38 are intended to give greater protection against expulsion for people who have lived a long time in the host state and have become integrated into it. Article 28(1) lists a number of considerations which Member States must take into account before deciding to expel a person, including their length of residence, age, health, family and economic situation, social and cultural integration into the host State and the extent of their links with the country of origin.

Duration of residence in the host state is particularly relevant: people who have acquired the right of permanent residence can only be expelled on ‘serious grounds of public policy or public security’ (Article 28(2)). After ten years residence in the host State, a person can only be expelled ‘on imperative grounds of public security’ (Article 28(3)(a)). This is also the only ground for expulsion of a minor (Article 28(3)(b)), unless it is necessary for the best interests of the child.

Go to your study pack and read the extract from Case 30/77 Regina v Pierre Bouchereau.


12.4.5 Procedural safeguards Articles 30–31 Article 30 of the Directive provides a right to receive written notification of the decision and the grounds for expulsion ‘precisely and in full’ unless the interests of state security preclude this. The notification must state where an appeal can be lodged, any time-limit, and the time allowed to leave the country, which must be at least a month except in a ‘duly substantiated case of urgency’.

Under Article 31(1), access to judicial or administrative process must be available to appeal against the decision. Article 31(2) allows the individual in certain circumstances to apply to suspend the expulsion order pending a decision on their appeal. Even if the person has been expelled, the Member State must allow them back in to present their case in person at the appeal unless it ‘would cause serious troubles to public policy or security’, or where the decision relates to refusal of entry (Article 31(4)).

In Case 348/96 Criminal proceedings against Donatella Calfa [1999] ECR I-12, an Italian tourist (a recipient of services within Article 56 TFEU (ex Article 49EC)) was expelled for life from Greece for possession of drugs (for her own use). It was held that the Greek law which laid down automatic expulsion for life for possession of drugs was contrary to Articles 45, 49 and 56 TFEU (ex Articles 39, 43 and 49 EC) and Article 3 of Directive 64/221. This prohibition of lifetime bans has now been expressly incorporated into the new Directive, in Article 32(1), which allows people to apply for the lifting of an order ‘after a reasonable period’, depending on the circumstances, and in any event after three years. Member States must decide within six months whether to lift the exclusion order. However there is no right of re-entry pending the decision on the application (Article 32(2)).

Activity 12.5 a. Read and compare the cases of Van Duyn and Adoui and Cornuaille. How does the

Court’s approach differ in these cases?

b. Gloria, the Tanzanian wife of Jerome, a French national working in Scotland, has been ordered to leave Scotland as information has reached the Scottish authorities that she is a member of the Tanzanian Liberation Front, an organisation which the UK suspects of supporting terrorism. Advise Gloria as to her rights under European Union law.

Summary The main changes to Directive 64/221 introduced by Directive 2004/38 are that the grounds of derogation will be subject to the principle of proportionality and Member States are required to take into account a number of specific factors before a person can be expelled. Protection increases with the length of time a person has been resident in the host state. There is a specific right to apply for lifting of the expulsion after a reasonable time if there has been a material change in the circumstances, and the Directive incorporates some of the case law in this area, such as the definition of a threat to public policy (Bouchereau).

The procedural rules are also more detailed to protect the individual and provide clear rights pending the decision on their appeal.


12.5 Rights of free movement for non-economically active persons


persons: beyond economic links’, sections 13.9–13.20, pp.449–454.

Craig and de Búrca, Chapter 23: ‘Citizenship of the European Union’, pp.847–873.

Directive 2004/38 on the right of citizens of the Union and their family members to move and reside freely within the territory of the Member States (replacing Directive 90/365 Retired people, Directive 93/96 Students, Directive 90/364 General right of residence, Directive 64/221, Directive 68/360, Directive 72/194, 75/34, 75/35 and Articles 10 and 11 of Regulation 1612/58).

12.5.1 Legal basis of the Directives It should be remembered that, before the introduction of EU citizenship in the Maastricht Treaty, there was no express Treaty power to adopt Directives granting free movement to people who were not economically active. The Council had to make use of the residual legislative power in Article 308 EC (now Article 352 TFEU) to adopt Directives for such people (although it was subsequently held that the education provisions of the Treaty provided an adequate legal base for the Students Directive). Three Directives provided for rights of entry and residence for students, retired people and those of independent means. People relying on these Directives are not to become a ‘burden’ on the host state and must have ‘all risks’ medical insurance in the host state.

These three Directives have been repealed and replaced by Directive 2004/38 (see below). Article 7(1)(b) provides a general right of residence, and Article 7(1)(c) covers students. The Directive has as its legal bases Article 18 TFEU (ex Article 12 EC) (non-discrimination), Article 21 TFEU (ex Article 18 EC) (right of free movement for citizens), as well as Articles 45, 49 and 56 (ex Articles 39, 43 and 49 EC) covering workers, the self-employed and service providers.

12.5.2 Extension of the principle of equal treatment to citizens of the Union generally Article 18 TFEU (ex Article 12EC) prohibits discrimination in matters within the scope of the EC Treaty.

Although citizenship does not provide a directly effective right to reside in another Member State, where an EU citizen is, in fact, lawfully resident in another Member State, whether on the basis of national law or European Union law, the Court has held that, as EU citizens, their situation is within the scope of the EU Treaties. They have a right not to be discriminated against under Article 18 TFEU (ex Article 12 EC), even if they do not fall into one of the economic categories recognised by European Union law.

The first case where the Court of Justice considered the citizenship Articles was Case-C-85/96 Martinez Sala v Freistaat Bayern [1998] ECR I-2691. Maria Martinez Sala was a Spanish national who had worked in Germany but was now unemployed. As such, she was no longer covered by the right to equal treatment as a worker under Article 7(2) of Regulation 1612/68. She had had residence permits but had allowed them to lapse in 1984 and thereafter only had documents stating that she had applied for a residence permit. Finally, in 1994 she did receive a residence permit.

During the period when she did not have a residence permit, in January 1993, she applied for a child-rearing allowance to the Freistaat Bayern (the German State of Bavaria) for her son who was born that month. This was refused on the grounds that she did not have German nationality or a residence permit. It was not disputed that she did have a right of residence.

Under the relevant German law, a person was entitled to the child-rearing allowance if they were permanently or ordinarily resident in German territory. A non-national who was authorised to reside in Germany also qualified for the allowance; however


the non-national had to be in possession of a residence permit in order to receive the allowance. Germans did not have to produce any document in order to receive the allowance.

The Court of Justice held that an EU national who is lawfully resident in another Member State falls within the provisions on EU citizenship under Article 17(2) EC (now Article 20(2) TFEU) and can rely on Article 12 EC (now Article 18 TFEU) which prohibits discrimination within the scope of application of the Treaty.

Requiring the EU national to produce a residence permit where the Member State’s own nationals are only required to be permanently or ordinarily resident in that Member State was discriminatory.

This was a very important case in that it gave her a right, as an EU citizen, to equal treatment with nationals in the host state, even though she was not a worker and her right to reside in Germany depended on national, not European Union, law.

However, note that Article 24(1) of Directive 2004/38 provides that only those living in another Member State on the basis of this Directive ‘shall enjoy equal treatment with the nationals of that Member State within the scope of the Treaty’. This only confers a right to equal treatment to people covered by the Directive (i.e. the four categories listed in Article 7) and falls short of the equal treatment generally for citizens of the EU lawfully resident in another Member State laid down by the Court in Martinez Sala.

12.5.3 The requirement of sufficient resources In relation to students, this was considered in Case C-184/99 Grzelczyk v Centre Public d’Aide Sociale [2001] ECR I-6193.

This followed the ruling in Sala, and was a further step in the recognition of the rights conferred by citizenship of the Union. It concerned the availability of a social assistance allowance, the minimex, to an EU citizen residing as a student in Belgium.

Mr Grzelczyk was a French student studying in Belgium and was covered by the Directive on the Right of Residence for Students. Under Article 1 of that Directive, students are required to make a declaration that they have sufficient resources for themselves and their families (this same rule is now in Article 7(1)(c) of Directive 2004/38). For the first three years of his studies he worked to support himself but was unable to do so in his fourth and final year and applied for the minimex (the Belgian minimum wage). He was refused it as he was not a worker and so was not covered by Article 7(2) of Regulation 1612/68.

The Court of Justice noted that a Belgian student in Mr Grzelczyk’s position would qualify for the minimex.

The Court held that the prohibition on discrimination under Article 12 EC (now Article 18 TFEU) must be read in conjunction with the provisions on citizenship under Article 18 EC (now Article 21 TFEU) and precluded a Member State from refusing a benefit such as the minimex to EU nationals from other Member States in circumstances where it would have been available to the Member State’s own nationals.

The Court said that, while Member States may withdraw rights of residence from students if they have insufficient resources to support themselves, such a measure should not be automatic. The Directive was designed to prevent students becoming an ‘unreasonable’ burden on the host state and did not entirely preclude access to benefits at any time. The Member State’s response must be proportionate.

The Court adopted a similar approach in Case C-224/98 D’Hoop [2002] ECR I-6191. Ms D’Hoop was a Belgian national attending school in France. She was denied unemployment benefit. The Court of Justice agreed that she was not a worker and not entitled under Regulation 1612/68 Article 7(2). However, it held that education is within the scope of the Treaty and that Ms D’Hoop was exercising her right to free movement as a citizen of the EU under Article 18 EC (now Article 21 TFEU). She therefore had a right not to be discriminated against in access to benefits.

Go to your study pack and read the extract from Case C-184/99 Rudy Grzelczyk v Centre public d’aide sociale d’Ottignies-Louvain-la-Neuve.


12.5.4 A citizen’s right to equal treatmentThe Court’s position on the situations which give rise to a right to equal treatment is summarised in the Court’s judgment in Case C-224/02 Heikki Antero Pusa [2004] ECR I-5763:

(16) As may be seen from the Court’s case law, Union citizenship is destined to be the fundamental status of nationals of the Member States, enabling those who find themselves in the same situation to enjoy within the scope ratione materiae of the Treaty the same treatment in law irrespective of their nationality, subject to such exceptions as are expressly provided for (see, inter alia, Case C-184/99 Grzelczyk [2001] ECR I-6193, paragraph 31; Case C-224/98 D’Hoop [2002] ECR I-6191, paragraph 28; and Case C-148/02 Garcia Avello [2003] ECR I-11613, paragraphs 22 and 23).

(17) The situations falling within the scope of Community law include those involving the exercise of the fundamental freedoms guaranteed by the Treaty, in particular those involving the freedom to move and reside within the territory of the Member States, as conferred by Article 18 EC (see, inter alia, as cited above, Grzelczyk, paragraph 33; D’Hoop, paragraph 29, and Garcia Avello, paragraph 24).

Important here also are the cases of Collins and Trojani discussed in the section on job-seekers rights above.

Article 24 of Directive 2004/68 provides for equal treatment for those covered by the Directive, but reiterates the position that Member States are not obliged to provide social security benefits for the first three months of residence (or longer in the case of job-seekers fulfilling the Antonissen conditions) or maintenance grants or loans for students (except, as now, in the case of workers, self-employed and their families).

For the first five years, the requirements of ‘sufficient resources’ and insurance will continue to apply to non-economically active citizens and their families, although Article 14(3) of the Directive states that:

An expulsion measure shall not be the automatic consequence of a Union citizen’s or his family member’s recourse to the social assistance of the host Member State.

12.5.5 Rights of residence The Citizenship concept began to have an impact on the rights of residence of the non-economically active. The following case is one of the most important in this respect. It established that Article 18 EC (now Article 21 TFEU) had direct effect. Case C-413/99 Baumbast, R v Secretary of State for the Home Department (2002) concerned Mr Baumbast, a German national resident in the United Kingdom, married a Colombian who had a daughter with Colombian nationality. They then had another daughter with dual German and Colombian nationality. Mr Baumbast was first employed in the UK and then ran his own company. He had now left the UK. Mr and Mrs Baumbast owned a house in the UK, their children attended school there and did not receive any social security benefits. Mrs Baumbast applied for indefinite leave to remain for herself and her family in October 1995. This was refused by the Secretary of State who then refused to renew Mr and Mrs Baumbast’s resident permits.

The Court of Justice held that the children of Mr and Mrs Baumbast had the right to continue their education in the UK. Article 12 EC of Regulation 1612/68 required the best possible conditions for the integration of the migrant worker’s family and preventing children from completing their education in the host state would be a disincentive to the migrant worker to exercise his rights of free movement and would therefore ‘create an obstacle to the effective exercise of the freedom guaranteed by the Treaty’. The nationality of the children of the migrant worker was immaterial and the rights of children of the ‘worker and his spouse’ in Regulation 1612/68 must be taken to include children of the spouse who was not an EU national. Therefore the Court held, in regard to the children that:

Children of a citizen of the European Union who have installed themselves in a Member State during the exercise by their parent of rights of residence as a migrant worker in that Member State are entitled to reside there in order to attend general educational courses there, pursuant to Article 12 of Regulation 1612/68.

Go to your study pack and read the extract from Case C-413/99 Baumbast and R v Secretary of State for the Home Department.


The fact that the parents of the children concerned have meanwhile divorced, the fact that only one parent is a citizen of the Union and that parent has ceased to be a migrant worker in the host Member State and the fact that the children are not themselves citizens of the Union are irrelevant in this regard. The Court then considered the situation of the mother who was the primary carer for the children, who had been refused leave to remain in the UK because she was married to an EU national who was no longer a migrant worker. The Court first referred to the rights of the children, as the removal of their parents who were their primary carers during the period of their education would deprive them of the right to continue that education in the host state. Regulation 1612/68 must be interpreted in the light of the requirement of respect for family life laid down in Article 8 of the European Convention. That requirement is one of the fundamental rights which, according to settled case law, are recognised by European Union law.

The right conferred by Article 12 of Regulation No 1612/68 on the child of a migrant worker to pursue, under the best possible conditions, his education in the host Member State necessarily implies that that child has the right to be accompanied by the person who is his primary carer and, accordingly, that that person is able to reside with him in that Member State during his studies. To refuse to grant permission to remain to a parent who is the primary carer of the child exercising his right to pursue his studies in the host Member State infringes that right (paragraphs 72 and 73). In answer to the second question the Court concluded that:

Where children have the right to reside in a host Member State in order to attend general educational courses pursuant to Article 12 of Regulation No 1612/68, that provision must be interpreted as entitling the parent who is the primary carer of those children, irrespective of his nationality, to reside with them in order to facilitate the exercise of that right notwithstanding the fact that the parents have meanwhile divorced or that the parent who has the status of citizen of the European Union has ceased to be a migrant worker in the host Member State.

The final question concerned Mr Baumbast who was no longer a migrant worker. The Court referred to his right as a citizen under Article 18 EC (now Article 21 TFEU) to reside in another Member State, ‘subject to the limitations and conditions laid down in the Treaty and secondary legislation’. The relevant conditions in Mr Baumbast’s case concerned Directive 90/364, which requires that EU nationals wishing to live in another Member State must have sufficient resources to avoid being a burden on the social assistance system and must be covered by sickness insurance. Mr Baumbast and his family had medical insurance in Germany where they received medical treatment and had not had recourse to the UK social insurance system. The objection of the UK authorities was that Mr Baumbast’s medical insurance would not cover emergency treatment received in the UK. The conditions in the Directive were intended to prevent beneficiaries of the right of residence becoming an ‘unreasonable’ burden on the public finances of the host Member State, but those conditions must be applied in accordance with the principle of proportionality. The Court therefore held that the UK’s requirement was disproportionate. The answer to the third question was therefore given as follows:

A citizen of the European Union who no longer enjoys a right of residence as a migrant worker in the host Member State can, as a citizen of the Union, enjoy there a right of residence by direct application of Article 18(1) EC. The exercise of that right is subject to the limitations and conditions referred to in that provision, but the competent authorities and, where necessary, the national courts must ensure that those limitations and conditions are applied in compliance with the general principles of Community law and, in particular, the principle of proportionality. (Emphasis added.)

Thus, the Court of Justice indicated for the first time that Article 18(1) EC (now Article 21(1) TFEU) had direct effect.

Case C-392/05 Georgios Alevizos v Ypourgos Oikonomikon [2007] ECR I-3505.

This case established the idea of ‘normal residence’, in other words, determining where in fact a person is resident.


Mr Alevizos, a Greek national and an Officer in the Greek Air Force, was posted to Italy with his family for a period of two years. On return to Greece, he was ordered to pay tax charges on a private car which he had bought in Italy. Contesting these charges, the question was referred to the Court of Justice whether an employee in the public service, who spends more than 185 days a year in another Member State with his family in order to carry out an official task of a definite duration, has, for the duration of the task, his normal residence in the host state, or in the first state of residence. The Court found that an employee in the public service in performance of a task in another Member State for more than 185 days a year has his normal residence in that second Member State. By finding this, the Court brought the applicant within the realm of the EC Treaty, as he was a worker exercising his freedom of movement.

As such, under Article 45 TFEU (ex Article 39 EC), it was therefore for the Greek court to decide whether the national provisions governing the taxes places a person transferring his residence in a less favourable position than those who are ordinarily resident in that State. If this is the case, the Greek court must then determine whether such a difference in treatment is justified by objective considerations that are independent of the residence of the persons concerned and proportionate to the legitimate aim of the persons concerned.

12.5.6 Grounds for refusal of entry or residence In the following case the Court examined the application of national legislation that equated the criminal conviction of a foreign national with an expulsion order from the territory of the Member State concerned.

Case C-50/06 Commission of the European Communities v Kingdom of the Netherlands [2007] ECR I-4383

The Commission brought a complaint against the Netherlands that it had failed to fulfil its obligations under Directive 64/221 by applying to citizens of the Union general legislation relating to foreign nationals, which makes it possible to establish a systematic and automatic connection between a criminal conviction and a measure ordering expulsion. As such, Union citizens are unable to enjoy the procedural safeguards laid down by Directive 64/221 and rights of free movement and residence within the territory of the Member States, as set out in Directive 2004/38.

12.6 A purely internal situation


persons: workers and establishment’, sections 12.82–12.83, pp.419–420 and sections 13.47–13.53, pp.464–466.

Craig and De Búrca, Chapter 21(4)(d): ‘Internal situations’, pp.762–763.

The Court of Justice has had to consider a number of cases concerned with the application of the provisions on free movement in the case of purely internal situations. It is settled case law that a situation whose features are entirely confined to a single Member State is not covered by the provisions relating to the freedoms of movement. In this context, the Court is frequently required to examine whether the fact that a European Union resident has their residence in the territory of a Member State other than the one in which he engages in economic activity constitutes an external element sufficient to enable him to rely on the free movement of persons, services or capital. In Case 35, 36/82 Morson and Jhanjan v Netherlands [1982] ECR 3723, the non-EU parents of two Dutch workers had no right to join their children in the Netherlands because the children had not moved to another Member State: it was a ‘purely internal situation’, outside the scope of European Union law. An interesting way round this was found in Case C-60/00 Carpenter [2002] ECR I-9607. Mr Carpenter, a UK national living in the UK, provided services to customers in other Member States while continuing to live in the UK. His wife, a non-EU national, had no right under UK immigration law to live in the UK.


She claimed a right as a spouse under European Union law. The Commission argued that this was a ‘purely internal situation’ as Mr Carpenter had not moved to another Member State. However, the Court held that as Mr Carpenter’s business involved providing services to clients in other Member States, Article 56 TFEU (ex Article 49 EC) EC applied, and in combination with Article 8 of the European Convention on Human Rights – the fundamental right to family life – entitled his wife to reside with him in the UK.

See also Chen, below.

Following on from the case of Carpenter, the Court was asked in the following case whether a child holding third-country nationality of a Union citizen, once granted a residence permit in the host Member State where her father was working, could then be denied entry and residence in the father’s Member State of origin.

Case C-291/05 Minister voor Vreemdelingenzaken en Integratie v R N G Eind [2007] ECR I-10719

The applicant, a national of the Netherlands, held the status of a worker in the UK. His daughter, a third country national, was granted a residence permit by the UK authorities to join her father in the UK. However, on their return to the Netherlands, she was refused leave to remain in that country. On appeal to the Court of Justice, the Court considered first of all whether the grant of a residence permit in one Member State meant that such status should be honoured in other Member States. In considering Article 10 of Regulation 1612/68 on family reunification, the Court concluded that the rights set out therein did not entail any autonomous right to free movement, and as such, Member States were not required to grant entry and residence to nationals of third countries, even if they were family members of European Union workers. The Court was then asked whether, on returning to the Netherlands, the applicant’s daughter should be able to enjoy the right of residence, even though prior to Mr Eind’s work in the UK she had not had this right, and also that upon return to the Netherlands, Mr Eind was no longer economically active. In finding that a negative answer would likely deter a person from exercising his right to freedom of movement, the Court applied Article 10 of Regulation 1612/68 by analogy, concluding that the right must exist for children under 21 years of age to join their family within the European Union.

Another example is the judgment in Case C-200/02 Zhu and Chen v Secretary of State for the Home Department [2004] ECR I-925. The Chinese mother of baby Catherine had deliberately gone to Belfast in Northern Ireland to give birth. Even though Northern Ireland is part of the UK, Irish nationality is available to anyone born on the island of Ireland if they do not hold any other nationality. Catherine obtained Irish nationality in this way and she and her mother then moved to Wales and applied for a long-term residence permit. This was refused on the grounds that Catherine was not exercising any rights under the Treaty, as she had not moved to another Member State. On appeal, a reference was made to the Court of Justice as to whether European Union law conferred a long-term right of residence (a) on Catherine, and (b) on her Chinese mother.

The fact that Catherine had never actually resided in a Member State other than the UK did not mean this was a ‘purely internal situation’: she had Irish nationality and so there was a European Union dimension to the case (see also Garcia Avello in 12.1.3 above).

Three possible legal bases for Catherine’s right to reside were considered:

as a recipient of services

purely as a national of a Member State, and therefore as a citizen of the Union, Catherine has the right to reside in the territory of a Member State

furthermore, under Article 1(1) of Directive 90/364, Catherine has the right to reside in the host state as she has sufficient resources and is covered by sickness insurance.

The Court confirmed that the right to reside while receiving services in the host state only applies to temporary services and expires once the service ends (see Chapter 13). It also restated the fact that Article 18(1) EC (now Article 21(1) TFEU) gives a right to reside which is subject to existing conditions and restrictions. In this case the relevant

Go to your study pack and read Kunoy, B. ‘A union of national citizens: the origins of the Court’s lack of Avant-Gardisme in the Chen case’, CMLRev 43:179-190, 2006.


restrictions and conditions were those laid down in Article 1 of Directive 90/364 (now Article 7(1)(b) of Directive 2004/38), namely that she should have sickness insurance in the host state and sufficient resources to avoid becoming a burden on the host state’s social assistance system.

The UK’s arguments – that Catherine was not of legal age of majority and that the resources belonged to her parents – were rejected by the Court. It held that there is no minimum age for entitlement to European Union law rights, nor any requirement as to the origin of the resources used to satisfy Article 1 of the Directive. The purpose of the ‘own resources’ rule was to prevent unreasonable demands on the host state’s public finances, and to specify the origin of the migrant’s resources would be disproportionate.

As to Catherine’s mother, she did not have a right to reside based on Directive 90/364 since Article 1(2)(b) of that Directive only confers a right on ‘dependent relatives in the ascending line’. Catherine’s mother was not dependent on her – in fact it was the other way round. However, the Court held that the child’s right to reside necessarily implied a right to be accompanied by her primary carer for the duration of the child’s residence in the host state.

12.6.2 Internal exileIn Case 36/75 Rutili v Minister for the Interior [1975] ECR 1 (see study pack) the Court said that Mr Rutili could rely on his European Union right to free movement as an Italian citizen in another Member State. A State could prevent their own citizens from moving freely around the country, but not nationals from other Member State. In R v Secretary of State for the Home Department, ex p Adams (1995) an exclusion order had been made against Mr Adams under the Prevention of Terrorism (Temporary Provisions) Act 1989 prohibiting him from coming to ‘mainland’ Britain because of his alleged terrorist activities in Northern Ireland. At the time, the case had been referred to the Court of Justice, relying inter alia on the citizenship provision now Article 21 TFEU (ex Article 18 EC), asking whether this had direct effect and whether the fact that it was an internal matter meant that his free movement rights could be taken away. That case was taken off the Court register when the situation eased and the restrictions on Mr Adams were lifted, so that no answer was given at that time.

In the climate of heightened awareness of terrorism post-September 11 2001 the Court appears to take a less lenient view. In Case C-100/01 Ministre de l’Intérieur v Oteiza Olazabal [2002] ECR I-10981 (see study pack) Mr Olazabal, a Spanish national, was banned from residing in 31 départements in France and prohibited from leaving his département of residence without authorisation. He had links with ETA, the Basque terrorist organisation, and had spent time in prison for conspiracy to disturb public order (ordre public). The lower courts took the view that the Rutili ruling by the Court of Justice prevented such measures being taken against him. The highest administrative court in France, the Conseil d’Etat referred the following question to the Court of Justice: did Articles 12 and 18 and (now Articles 18 and 21 TFEU), the principle of proportionality, and the provisions of Directive 64/221 preclude a Member State from taking such measures, which amounted to internal exile for reasons of public policy, or could he only be excluded from the whole of the territory? The Court contrasted the case with that of Rutili, who had lived in France since birth and who was only accused of political and trade union activities. The Court answered the question as follows.

Neither Article 48 of the EC Treaty [pre-Amsterdam numbering, now Article 45 TFEU], nor the provisions of secondary legislation which implement the freedom of movement for workers preclude a Member State from imposing, in relation to a migrant worker who is a national of another Member State, administrative police measures limiting that worker’s right of residence to a part of the national territory, provided

that such action is justified by reasons of public order or public security based on his individual conduct

that, by reason of their seriousness, those reasons could otherwise give rise only to a measure prohibiting him from residing in, or banishing him from, the whole of the national territory


that the conduct which the Member State concerned wishes to prevent gives rise, in the case of its own nationals, to punitive measures or other genuine and effective measures designed to combat it.

12.6.3 Fundamental human rights

Essential reading Horspool and Humphreys, Chapter 6: ‘General principles of law’, sections

6.48–6.61, pp.156–162.

Craig and de Búrca, Chapter 11: ‘Human rights in the EU’, pp.379–427.

Article 6(2) of the Treaty on European Union states that fundamental rights are protected in the Union legal order. It is noteworthy that the Court of Justice increasingly refers to the right to family life, laid down in Article 8 of the European Convention on Human Rights, when dealing with problems of family situations which do not fit with the European Union’s strict rules on family members’ residence rights. See, for example: C-413/99 Baumbast and R [2002] ECR I-7091 and the cases of Carpenter and Akrich (below).

Activity 12.6Read the Court’s judgment in the case of Zhu and Chen and answer the following questions:

a. Why was Catherine’s situation treated as coming within the scope of the EU free movement provisions even though she had never moved to another Member State?

b. Article 21(1) TFEU (ex Article 18(1) EC) is subject to restrictions and limitations. What was the limitation placed on the right to reside conferred by Article 21 TFEU (ex Article 18 EC) in the circumstances of this case?

c. What was the legal basis on which Catherine’s mother was allowed to reside? Would her Chinese father and brother also have had a right to reside?

12.7 Directive 2004/38 on rights of Union citizens and their families

Essential reading Directive 2004/38 EC.

This Directive replaces the following Directives.

Council Directive 68/360 on rights of entry and residence for workers and their families.

Council Directive 74/148 in relation to establishment and service providers.

Council Directive 90/364 on the general right of residence.

Council Directive 90/365 on residence rights of retired persons.

Council Directive 93/96 on residence rights of students.

Council Directive 64/221 on the refusal of entry or residence on the grounds of public policy, public security and public health.

Directive 2004/38 also replaces Articles 10 and 11 of Council Regulation 1612/68 on rights of family members.

The basic concept behind the Directive is that EU citizenship is the ‘fundamental status’ of those exercising their right to free movement (Preamble paragraph 3), rather than their particular status as worker, self-employed, student, etc. This approach is founded on the status of citizenship (Articles 20–21 TFEU (ex Articles17–18 EC) and the principle of non-discrimination (Article 18 TFEU (ex Article 12EC).

Go to your study pack and read Roland Rutili v Ministre de l’Intérieur; Case 36/75Joined Cases C-482/01 and C-493/01 Georgios Orfanopoulos and Others and Raffaele Oliveri v Land Baden- Württemberg


A number of provisions of the Directive have already been referred to above (in particular Articles 27–31 replacing Directive 64/221 referred to under 12.4 above), the other main provisions are briefly analysed below.

12.7.1 To whom does the Directive apply? The Directive applies to Union citizens and their family members but only if they ‘move to or reside in a Member State other than their own’ (Article 3(1)). Thus there is no change to the rule that the rights of EU nationals and their family members under EC free movement law are only activated once they have exercised the right of free movement (i.e. have moved to or reside in another Member State). This would still exclude the case of Morson (Case 35, 36/82 Morson and Jhanjan v Netherlands [1982] ECR 3723) which was a ‘purely internal situation outside the scope of European Union law (see 12.5 above).

12.7.2 Which family members are covered? Article 2(2) defines family members covered by the Directive. It includes the spouse (2(2)(a)).†

Interpreting the concept of ‘spouse’ under Regulation 1612/68, the Court held that it means husband or wife, not co-habiting partner, see Case 59/85 Netherlands v Reed [1986] ECR 1283, [1987] 2 CMLR 448I. Ms Reed had no right to remain in the Netherlands because she and her partner were not married (she was not a ‘spouse’ under Article 10), but the Court held that she was a ‘social advantage’ under Article 7(2) of Regulation 1612/68 because a Dutch national in the same situation as her partner would have been entitled to have his/her non-national partner reside in the Netherlands. To deport her would be a breach of her partner’s right under Article 7(2) to the same social advantages as Dutch nationals.

The Directive gives registered partners the status of family members as well as spouses but ONLY where legislation in the host Member State recognises registered partnerships, and only on the terms of the relevant national legislation (Article 2.2(b))†

There is for the first time acknowledgment of co-habitees in Article 3(2)(b) of the Directive which says that Member States should ‘facilitate’ the entry of a ‘partner with whom the Union citizen has a durable relationship, duly attested’.

No definition is provided of ‘durable’, nor are there details of how the relationship may be attested, but Member States must carry out an extensive examination of the personal circumstances and justify any refusal of entry or residence to partners.

The provision in relation to children (Article 2(2)(c)) covers, as before, ‘direct descendants who are under the age of 21 or are dependants’, but also specifically includes those of the spouse or partner. This recognises the fact that with increasing levels of divorce and remarriage, the children of the family may not necessarily be the children of both the spouses/partners.

‘Dependent direct relatives in the ascending line of the EU national and his spouse or partner’ are included as before (Article 2(2)(d)).

Other family members such as siblings, uncles, cousins etc. still have no automatic right to accompany the worker, but under Article 3(2)(a), Member States should also ‘facilitate’ the entry of other family members not covered by Article 2(2), who are dependent on the EU national or members of his/her household, or ‘where serious health grounds strictly require the personal care by the Union citizen’. Again the Member State must carry out a detailed investigation and justify any refusal of entry.

If a person has worked in another Member State and then returned home, his/her family members keep their European Union law rights even after returning to the home state, see C-370/90 Surinder Singh [1992] ECR I-4297.

The position was clarified in the recent case C-109/01 Akrich [2003] ECR I-9607. Mr Akrich, a Moroccan national who had been deported from the UK following a criminal conviction, had returned illegally and married a UK national. His wife then went to

† Articles 10 and 11 of Regulation 1612/68 which specified the members of the worker’s family entitled to accompany the worker and their rights to work are repealed and replaced by Directive 2004/38.

† The Court, interpreting the earlier provision on family members’ rights to reside in the host state, has held that it does not matter if a married couple stop living together as long as they are still legally married: 267/83 Diatta v Land Berlin [1985] ECR 567, [1986] 2 CMLR 164.)

Go to your study pack and read the extract from Case C-370/90 The Queen v Immigration Appeal Tribunal et Surrinder Singh, ex parte Secretary of State for Home Department.


work in Ireland where he joined her. The couple then sought to return to live in the UK, relying on Singh. The Court held that, in order to benefit from the European Union right to return to the home state with his/her spouse, the non-EEA spouse must have been lawfully resident in a Member State in the first place.

The Court went on to state that couples who entered into a ‘marriage of convenience’ could not claim rights under Article 10 of Regulation 1612/68, but that, if the marriage was genuine, it was irrelevant that the couple had deliberately moved to another Member State in order to acquire European Union law rights.

Finally, the Court held that, even if Mr Akrich had not been lawfully resident in the UK prior to moving to join his spouse in Ireland, the English Court must ‘none the less have regard to the right to respect for family life under Article 8 of the Convention, provided that the marriage is genuine’.

12.7.3 Formalities for entry and residence: Article 5 – the first three months The provisions and documentary requirements for entry and residence laid down in Council Directive 68/360 are replaced by Directive 2004/38.

As before, for entry, a valid identity card or passport is all that is needed. A visa may be required for family members who are not EU nationals but the host state must facilitate this. The new Directive states that any visa must be issued free of charge using an ‘accelerated procedure’ – Article 5(2). If the non-EU family member already has a residence card for the host state, no visa may be required (Article 5.2)

Member States must not automatically refuse entry to people lacking travel documents or visa: they may not be turned back without being given a reasonable opportunity to prove their identity and right to enter (Article 5.4).

12.7.4 Rights of residence: Articles 6 and 7 – the first three months All EU nationals, and their family members accompanying or joining them, irrespective of nationality, have the right of residence in another Member State for three months with no conditions other than possession of a valid identity card or passport (Article 6).

Stays longer than three months

Article 7 deals with rights of residence longer than three months and essentially consolidates the existing law, providing a right of residence for:

workers and self-employed (7(1)(a))

those with their own resources and comprehensive sickness insurance in the host state (7(1)(b))

students, including those on vocational courses, who have comprehensive sickness insurance in the host state and make a declaration that they have the resources to support themselves and their families without relying on benefits (7(1)(c))

family members of any of these (7(1)(d)).

Article 8.4 states that Member States may not lay down a specific amount as being ‘sufficient resources’.

Article 7.3 lists the circumstances in which a person who is no longer working will continue to have the status of a worker or self-employed person.

Residence permits

The requirement under Directive 68/360 for migrants to obtain a ‘residence permit’ has been abolished. In its case law, the Court had made clear that the residence permit was merely documentary evidence of the right to reside – the source of the right being the Treaty itself; see Case 48/75 Procureur du Roi v Royer [1976] ECR 497. It followed that failure to obtain a residence permit did not mean a person could be deported. It would be an administrative offence for which a proportionate penalty (for example a fine) might be imposed: see Pieck [1980] ECR 2171.


Under the new Directive 2004/38, no document is required for the first three months. For stays longer than three months, residence permits are abolished except for family members who are non-EU nationals.

Article 8 allows Member States to require EU citizens and their families to register. Member States must issue a registration certificate immediately.

The documentation needed to register depends on which of the four categories of migrant they fall into (Article 7 above).

Family members who are non-EU nationals

Article 9 requires Member States to issue a residence card to family members who are not EU citizens if the stay will exceed three months.

It must be issued within six months of application (Article 10(1)) and it must be valid for at least five years unless the EU citizen’s envisaged stay is shorter than five years.

As now, under Article 8(2) for EU nationals, and 9(3) for non-EU family members, failure to comply with requirements in relation to residence cards and registration may only attract a proportionate, non-discriminatory administrative penalty and does not affect the existence of the right to reside.

Article 25 deals with the status of registration certificates and residence cards, saying that possession of these must not be a prerequisite for exercising the rights. Article 26 says that Member States can only require non-nationals to carry their card and make checks on their documentation if the same provisions apply to its own citizens and any penalties for non-compliance must also be the same as for nationals.

12.7.5 Consequences of death, departure, divorce or termination of registered partnership Under the old rules, death of the EU national, or divorce, could leave former spouses without residence rights, particularly if they were not EU nationals themselves.

Article 12 provides that if the EU citizen dies or leaves the host state, family members who are themselves EU nationals do not lose the right to reside. Nor do non-EU family members unless they have been resident in the host state for less than a year. However the right to continued residence for both EU and non-EU family members depends either on being workers or self-employed themselves, or fulfilling the ‘sufficient resources’ requirement (unless they have acquired the right of ‘permanent residence’ – see below).

Article 13 is a new provision dealing with the consequences of divorce or termination of a registered partnership. EU-national family members can remain. For non-EU national family members the conditions are more stringent, but nonetheless represent an advance on the current position. They can stay on in the host state if:

a. the marriage or registered partnership has lasted at least three years, including one year in the host Member State; or

b. by agreement between the spouses or the partners or by court order, the spouse or partner has custody of the Union citizen’s children; or

c. it is warranted by particularly difficult circumstances, such as having been a victim of domestic violence while the marriage or registered partnership was subsisting; or

d. by agreement between the spouses or partners or by court order, the spouse or partner who is not a national of a Member State has the right of access to a minor child, provided that the court has ruled that such access must be in the host Member State, and for as long as is required.

Again, unless they have acquired the right of permanent residence, all family members (EU and non-EU) covered by this section must be workers, self-employed or fulfil the ‘sufficient resources’ and medical insurance requirements.


12.7.6 Retention of the right of residence This section basically deals with a Member State’s right to expel a person who no longer fulfils the conditions for residence under Article 7. For example, what if a person who entered under Article 7(1)(b) no longer has enough money to support him/herself and family. Can they be deported? During the first three months, a person must not be an ‘unreasonable burden’ on the host state (Article 14(1)). Thereafter, they must fulfil the conditions of one of the four categories listed in Article 7.

Article 14(3) says that they may not be automatically expelled if they need state benefits.

Article 14(4)(a) says a Member State can never expel a worker or self-employed person even if they need benefits (see also Kempf), or a job-seeker (14(4)(b)) as long as they are continuing to seek work with a genuine chance of success.

Under Article 15, a Member State seeking to expel a person because they no longer fulfil the conditions for residence under Article 7, must follow the procedures in Articles 30–31 (below) which give the migrant rights of appeal.

Expiry of ID card or passport is not a ground for expulsion (Article 15(2)).

12.7.7 The right of permanent residence Article 16 creates a new right of permanent residence once an EU citizen or family member (EU or non-EU) has been lawfully resident in the host state for five years. Continuity of residence is not lost by absences of up to six months in any one year or in certain other circumstances such as studying abroad or travelling for medical reasons. Once the right of permanent residence has been acquired, it is not subject to any of the conditions and requirements laid down in Chapter 3 (Articles 6–15 on the right of residence) (i.e. it is no longer necessary to establish that the person is a worker, self-employed or has sufficient own resources). The right is lost only if the person is absent from the host state continuously for two years.

Article 17 contains detailed provisions for the earlier acquisition of the right of permanent residence for the EU national or family members in particular circumstances; including unemployment due to incapacity to work, or retirement or death.

Article 18 clarifies that non-EU family members of an EU national who has died (Article 12.2) or from whom they are divorced (Article 13.2) only get the right of permanent residence after lawful residence of five years, whereas they may acquire it immediately in the circumstances covered by Article 17.

Articles 19–21 lay down administrative requirements for the issue of a ‘permanent residence card’. Interestingly, Article 21 provides that continuity of residence will only be interrupted by an expulsion decision if that decision has been enforced!

Articles 22–23 of the new Directive, which cover both residence and permanent residence holders, contain the existing rules that these rights must cover the whole territory of the Member State (Article 22), and include the right of family members to work (Article 23).

Chapter 7 (Articles 34–41) contains final provisions including the requirements on Member States in relation to implementation, which must be completed within two years from the date of publication.


Self-assessment questions 1. Which members of an EU citizen’s family have the right to accompany him or her

to another Member State?

2. What is the meaning of ‘spouse’ for the purposes of Regulation 2004/38?

3. How might European Union law on family residence rights be used to ‘get round’ national immigration rules? In what way has this possibility been restricted by judgment in Akrich?

4. How long will it take to acquire a permanent right of residence in the host state?

5. What are the differences between the rights of EU national and non-national family members?

Activity 12.7Advise Helena, a British national, who has moved from London to work in a bar in Spain. Helena’s purpose was to enable her aged grandmother (who is Swiss), to join her there with a view to moving back to the UK as soon as possible. (Note that Switzerland is not an EU Member State.)

SummaryDirective 2004/38 usefully consolidates previous Directives and case law in a single text. It reduces administrative formalities – for example by abolishing the need for residence permits for EU nationals. It improves the position of family members in the event of death or divorce, particularly for those who are not themselves EU citizens. For the first time, registered partnerships are recognised and Member States are urged, but not obliged, to admit cohabitees.

The Directive creates a new right of permanent residence: after five years of continuous lawful residence in another Member State, the distinction in terms of the rights to equal treatment (including access to benefits) as between those working and those who are not economically active will disappear. Individuals will have the right of residence without conditions or restrictions and be entitled to virtual equality of treatment with nationals.

Useful further reading Adinolfi, A. ‘Free movement and access to work of citizens of the new Member

States: the transitional measures’, CMLRev 42 2005, pp.469–498.

Giubboni, S. ‘Free movement of persons and European solidarity’, European Law Journal, 13(3) 2007, pp.360–379.

Eckes, C. ‘Judicial review of European anti-terrorism measures: the Yusuf and Kadi judgments of the Court of First Instance’, European Law Journal 14(1) 2008, pp.74–82.

Heliskoski, J. ‘Case T-253/02, Chafiq Ayadi v Council, judgment of the Court of First Instance of 12 July 2006; Case T-49/04, Faraj Hassan v Council and Commission, judgment of the Court of First Instance of 12 July 2006’, CMLRev 44 2007, pp.1143–1157.

Schoukens, P. ‘Europe at struggle with social welfare’, European Law Journal 13(3) 2007, pp.424–433.

For a discussion of rights in European Union law, see Hilson, C. ‘European Union What’s in a right? The relationship between Community, fundamental and citizenship rights in EU law’, ELRev, 29(5) 2004, pp.636–651.

For an interesting analysis of the judgment in Akrich, see: White, R. ‘Conflicting competences: free movement rules and immigration laws’, ELRev, 29(3) 2004, pp.385–396.

Directive 2004/38 Articles 27–33.


Sample examination questions Question 1 To what extent does EC law guarantee a national of an EC Member State the right to work in any other EC country?

Question 2 Jacques, a Belgian engineering student, wishes to follow a two-year postgraduate engineering course in the United Kingdom, for which he has been accepted. He is already a fully qualified electrical engineer in France. When he disembarks at Dover with Nancy, his American co-habitee, and their six-month old baby, their luggage is searched and found to contain pornographic literature, which is immediately confiscated. The Home Office is also in possession of a French police report to the effect that Jacques is a member of an anarchist organisation. The Immigration Officer, who is aware of the French police report, refuses them permission to enter the UK on the ground that it would not be conducive to the public good. Advise Jacques and Nancy as to their rights, if any, under EC law.

Question 3 Stavros, a national of Cyprus, goes to Berlin with his English girlfriend, Helen, who has finished pupillage at the English Bar. They have been living together in Cyprus for a few months and aim to continue to do so in Berlin.

In Berlin, they join the religious sect of the Vedans, which is gaining in popularity. Stavros offers to help out in the Vedan’s kitchen garden; Helen applies to a firm of lawyers who have advertised for young lawyers with a knowledge of other legal systems. She thinks she has a good chance of being appointed as she speaks German fluently. The firm turns her down as she has not been trained in Germany and, moreover, they really need German nationals as they give a lot of advice to the Federal government. She then applies to the Federal Citizen’s Advice Bureau for a job but is again turned down for similar reasons.

Helen and Stavros like living with the Vedans and apply for a residence permit. They are both turned down. Stavros receives an expulsion order immediately; Helen is informed she will not be allowed to stay if she does not find a self-supporting job within the next six weeks.

They come to you for advice. Can European law help them? If so, how?

Advice on answering the questions Question 1 Article 45 TFEU (ex Article 39 EC) guarantees this right for employed people, Article 49 TFEU (ex Article 43 EC) for self-employed and Article 56 TFEU (ex Article 49 EC) lays down a right to provide services in another Member State. These have been supplemented by the right to move in search of work (Antonissen). However the rights are not absolute. The question requires consideration of provisions which limit the right to work. In relation to Article 45 TFEU (ex Article 39 EC), these include the public service exception under Article 45(4) TFEU (ex Article 39 EC): cite relevant case law showing the Court’s narrow interpretation of this (for example Commission v Belgium). The derogations in Article 45(3) TFEU (ex Article 39(3) EC) on grounds of public policy, public security and public health, and relevant case law, should also be discussed. Again, point out that they have been narrowly interpreted and their use further limited by Directive 2004/38 replacing Directive 64/221, but, nonetheless, they may deprive some people of the right to work in another Member State.

Question 2 Jacques has a right to come and study in the UK under Article 7(1)(3) of Directive 2004/38 (which replaces Directive 93/96 on the Right of Residence for Students from 1 May 2006). Article 7(1)(d) of Directive 2004/38 entitles his spouse and dependent children to accompany him. However, the definition of family members in Article 2 of the Directive includes spouse but not co-habitee. Nancy is not his spouse and so would not be covered, although the baby would be. Article 3(2)(b) may help Nancy: it requires the Member State to facilitate entry and residence for ‘the partner with whom the Union citizen has a durable relationship, duly attested’. Nancy may be able to derive a right to reside as the principal carer of the baby (see Baumbast, Chen). The right to family life under Article 8 ECHR should also be considered.

The confiscation of the pornographic literature comes under the law on free


movement of goods and may be lawful under Article 36 TFEU (ex Article 30 EC) on grounds of public morality. This might constitute a public policy ground for excluding Jacques.

Rights of residence for Union citizens and their families are subject to derogation on grounds of public policy (Article 27 of Directive 2004/38). The decision to refuse entry must be based on the personal conduct of Jacques according to Article 27(2) but in van Duyn it was held that current active membership of an organisation constitutes personal conduct. Compare this case with Adoui and Cornuaille.

Article 28 of the Directive lists the factors which the Member State must take into account before refusing entry. Articles 30–32 provide procedural safeguards.

Question 3 Stavros’s rights depend on whether he is from Greek Cyprus or Turkish Cyprus. If the former, following accession to the EU in May 2004, he is an EU national and citizen of the EU. If from Turkish Cyprus he does not have free movement rights under European Union law and does not derive any rights from his relationship with Helen as they are not legally married (Article 2(a) of Directive 2004/38). ‘Spouse’ was interpreted by the Court of Justice in Netherlands v Reed to mean legally married couples only (this is its usual meaning in English). However, he may have rights under Article 3(2)(b).

If he is an EU national, he may have a right to reside under Article 45 TFEU (ex Article 39 EC) as a worker. State the definition of worker (Levin, Lawrie Blum). His work in the kitchen garden could qualify, even if remuneration is ‘in kind’ through board and lodging (Steymann). We are not told the grounds for the expulsion order against Stavros. If he is a worker, the only grounds are Article 45(3) TFEU (ex Article 39(3) EC): public policy, public security and public health. Article 30(3) of Directive 2004/38 precludes immediate deportation – he must be allowed at least a month from the date of notification. Article 30(2) gives him a right to reasons and under Article 31(1) he must be given the chance to challenge the decision. Helen is clearly an EU national and has a right to go to Germany to seek work under Article 45 TFEU (ex Article EC (Lebon, Antonissen). She must be allowed a reasonable time and her right to reside continues as long as she can show that she is actively seeking work and has a genuine chance of success (Antonissen) – now incorporated into Article 14(4)(b) of Directive 2004/38. As she is qualified as a lawyer and speaks fluent German, this test is likely to be fulfilled, particularly as she has evidence of having made job applications. The decision to expel her if she does not find work within six weeks is, therefore, unlawful. Automatic expulsion is not allowed.

The firm’s refusal to recognise her qualifications as she did not train in Germany amounts to indirect discrimination on grounds of nationality contrary to Article 45 TFEU (ex Article 39(2) EC). Article 45 TFEU (ex Article 39 EC) is horizontally directly effective and so applies to a private employer. (There is also a Directive on Mutual Recognition of Qualifications which she can invoke – see Chapter 13.) The post may be covered by the public service exception in Article 45(4) TFEU (ex Article 39(4) EC): cite the test laid down in Commission v Belgium. Does the nature of the post require special allegiance to the German state? This is a question of fact and we are not given enough information to reach a definite conclusion, although it seems unlikely.

As for the Federal Citizen’s Advice Bureau post, that is even less likely to fulfil the test for public service. It is not the nature of the employer, but the nature of the work, which determines whether the post is in the ‘public service’.


Reflect and review







Ready to move on


Need to study again

I can explain the rights of entry and residence for EU citizens working in a Member State other than their own.

I can explain the rights of entry and residence of family members of EU citizens.

I can explain the rights of job-seekers in another Member State.

I can apply the principle of equal treatment with reference to the relevant secondary legislation and case law.

I can explain the grounds on which Member States may refuse entry to, or expel, nationals of other Member States and their family members.

I can write advice to clients setting out their free movement rights in hypothetical situations.

I can demonstrate an understanding of the European Court’s role in enlarging the scope of free movement rights.

I can compare the position of economically active people with that of non-economically active migrants.

I can explain and critically evaluate the development of the rights conferred by EU citizenship and the changes introduced by Directive 2004/38 EC on citizenship and free movement.



Must revise

Revision done

12.1 Scope of the rights to free movement

12.2 Nationality

12.3 Equal treatment for workers and their families

12.4 Grounds for refusal of entry or residence

12.5 Rights of free movement for non-economically active persons

12.6 A purely internal situation

12.7 Directive 2004/38 on rights of Union citizens and their families

13 Establishment and services

Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 264

13.1 The distinction between services and establishment. . . . . . . . . . . 265

13.2 Establishment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 266

13.3 Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 279



Introduction

The provisions on establishment and services† cover both natural persons (people) and legal persons (companies). The principle of equality of treatment and non-discrimination on the grounds of nationality in Article 18 TFEU (ex Article12 EC) underpins these areas as it does all the free movement provisions. The rights are subject to the derogations on grounds of public policy, public security and public health. The Directive on Free Movement and Citizenship, Directive 2004/38, applies to all natural persons, workers or the self-employed, but not to companies. See, for example, Article 7.1(a) of the Directive which gives the right of residence in the territory of another Member State to all self-employed persons as well as well as workers.

Directive 2004/38 replaces the separate Directive on entry and residence for the self-employed and service providers (Directive 73/148) which has been repealed. Much of the case law on the freedom of establishment is concerned with the extent to which a Member State or professional organisation must recognise a professional qualification obtained in another Member State. The principle of mutual recognition of qualifications has been established by the Court of Justice and implemented by secondary legislation.

Essential reading Horspool and Humphreys, Chapter 11: ‘Free movement of services: the freedom

to provide and receive services’, pp.359–384.

Craig and De Búrca, Chapter 22: ‘Freedom of establishment and to provide services’.


explain the differences between the freedom of establishment and the freedom to provide/receive services

explain the legal basis for the principle of non-discrimination on grounds of nationality in relation to services and establishment

apply Articles 49 and 56 TFEU (ex Articles 43 and 49 EC) to problems

explain and apply the general rules on mutual recognition of qualifications

explain the circumstances in which a host state can impose its own rules on the provision of services by persons based in another Member State

explain the grounds on which restrictions on the free movement of services or establishment can be justified

explain the effect of the ‘official authority’ derogation.

† ‘Establishment’ and ‘services’ both relate to the right of EU citizens to carry out business activities in other Member States.

Important note to studentsThe two chapters on free movement of persons (Chapters 12 and 13) should be studied together as they are often examined together.

EU Law 13 Establishment and services page 265

13.1 The distinction between services and establishment

Essential reading Horspool and Humphreys, Chapter 11: ‘Free movement of services: the

freedom to provide and receive services’, sections 11.1, pp.359–363; Chapter 12: ‘Citizenship and free movement of persons: workers and establishment’, sections 12.42–12.44, pp.402–404.

Craig and De Búrca, Chapter 22: ‘Freedom of establishment and to provide services’, pp.792–794.

In Case 221/89 Factortame [1991] ECR I-3905, [1991] CMLR 589, the Court defined establishment as ‘the actual pursuit of an economic activity through a fixed establishment in another Member State for an indefinite period’ (paragraph 20 of the judgment). The Case 55/94 Gebhard v Consiglio Dell’Ordine Degli Avvocati e Procuratori di Milano [1995] ECR I-4165 sets out the criteria for determining whether a person or company is established in another Member State or a provider of Services. The difference between services and establishment is that ‘establishment’ applies to an activity which is pursued on a ‘stable and continuous basis’ in another Member State, whereas services are temporary in nature. Whether the activity falls under establishment, Article 49 TFEU (ex Article 43 EC) or services, Article 56 TFEU (ex Article 49 EC) depends on the ‘duration, regularity, periodicity and continuity of the provision of the services’. See also new Directive 2005/36, Article 5.2.

The Gebhard case (see below) also clarifies that the service provider may have an office in the host state; the Court held that the provider of services may set up ‘the infrastructure necessary for the purpose of performing the services in question’ in the host Member State, such as an office or chambers.

Another key difference between services and establishment lies in the extent to which Member States are allowed to impose their own rules on non-nationals. The Court has held that, in the case of establishment, the host state can require compliance with its own rules governing the activity concerned. Although, as we will see, this approach has been increasingly scrutinised by the Court and subjected to the principle of proportionality.

On the other hand, the host state’s rules should not be applied to the same extent to a person providing services on a temporary basis, since they are already having to comply with the rules in their home state and this would amount to a dual burden; see Case 205/84 Commission v Germany (Insurance Services) [1986] ECR 3577, [1987] 2 CMLR 69.

This different treatment of services and establishment can give rise to a problem if a person or company is established in one Member State while doing most of their business in another Member State. If this enables them to evade the rules governing the exercise of that type of activity in the second Member State, this could be regarded as an abuse of the service provisions. See Case 37/74 Van Binsbergen. However, see the case Centros, below.

Activity 13.1Explain who or what Article 49 TFEU (ex Article 43 EC) is intended to protect.


Go to your study pack and read paragraphs 25–27 of the extract from Case 55/94 Reinhard Gebhard v Consiglio dell’Ordine degli Avvocati e Procuratori di Milano.


13.2 Establishment


persons: workers and establishment’, section 12.42–12.69, pp.402–413.

Craig and De Búrca, Chapter 22: ‘Freedom of establishment and to provide service’, pp.797–813.

The following Treaty Articles.

Article 49 TFEU (ex Article 43 EC): basic principles and definitions

Article 51 TFEU (ex Article 45 EC): derogation for activities connected with the exercise of official authority

Article 52 TFEU (ex Article 46 EC): exception on the grounds of public policy, security and health

Articles 50, 52(2), 53 TFEU (ex Articles 44, 46(2), 47 EC): powers to enact secondary implementing legislation

Article 54 TFEU (ex Article 48 EC): extends the provisions on establishment to legal persons (companies), excluding non-profit-making organisations.

13.2.1 Entry and residenceCouncil Directive 73/148 (now repealed) detailed the rights of entry and residence for self-employed persons, service providers and their family members. Directive 2004/38 has replaced these provisions.

A significant change made by Directive 2004/38 is that self-employed persons and their families are now included within the scope of this legislation which grants the highly significant right of equal treatment; formerly it was only the EU migrant worker who enjoyed these benefits. Article 7(1)(a), which sets out which citizens of the EU have the right of residence for more than three months, gives this right to both workers and the self-employed with no distinction.

Direct effect of Article 49 TFEU (ex Article 43 EC)

In 1962, under Article 46(2) EC (now Article 52(2) TFEU), the Council promulgated a General Programme for the Abolition of Restrictions on Freedom of Establishment (OJ Sp Ed, 2nd series, No 9, p.7) and subsequently adopted a series of Directives harmonising national requirements for particular areas of economic activity. Such Directives make it easier for non-nationals to establish themselves in particular fields in other Member States. They are not a prerequisite for the right to establish oneself in another Member State, however. The Court held in Case 2/74 Reyners v Belgium [1974] ECR 631 that even if there is no Directive harmonising national rules on the qualifications required for a particular activity, Article 49 TFEU (ex Article 43 EC) itself contains a directly effective prohibition of discrimination on grounds of nationality. Reyners, a Dutch national, possessed the legal qualifications of the host state, Belgium, but had not been allowed to join the Belgian bar because he was not Belgian. Belgium argued that, as there was no Directive, he could not rely on European Union law. The Court held that he could rely directly on Article 49 TFEU (ex Article 43 EC) of the Treaty as he was being discriminated against on grounds of nationality alone. This case therefore establishes the direct effect of Article 49 TFEU (ex Article 43 EC).

13.2.2 Discrimination on grounds of nationality or establishmentDiscrimination on grounds of nationality in relation to the freedom of establishment is prohibited under Article 49 TFEU (ex Article 43 EC). The general principle of non-discrimination in all matters within the scope of the Treaty under Article 18 TFEU (ex Article 12 EC) also applies to self-employed people, companies and service providers, entitling them to equal treatment with nationals.


The equal treatment rule is now also laid down specifically in Article 24 of Directive 2004/38.

A case in which discrimination on grounds of nationality was held to breach Article 49 TFEU (ex Article 43 EC) is the famous Case C-213/89 Factortame Ltd v Secretary of State for Transport [1991] ECR I-3905, [1990] 3 CMLR 1, in which the UK’s attempt to impose residence and nationality requirements for those operating fishing boats fishing against the UK fishing quota was held unlawful.

In Case 305/87 Commission v Greece [1989] ECR 1461, a Greek rule restricting rights of foreigners to own property in Greece was held to breach Article 49 TFEU (ex Article 43 EC).

13.2.3 Does Article 49 TFEU (ex Article 43 EC) apply to ‘equally applicable’ measures?As we saw in Chapter 10, the Court decided in Cassis that Article 34 TFEU (ex Article 28 EC) also covered ‘indistinctly applicable’ or ‘equally applicable’ measures unless they were justified by mandatory requirements. However, the basic approach in relation to persons was that Member States could require compliance with their own rules provided that they applied them in a non-discriminatory way. For example, a Member State could decide what qualifications were needed for a particular profession (in the absence of harmonised European Union rules). The Court of Justice did not examine the validity of the national rules themselves, but required the Member State to examine a person’s qualifications gained in other Member States to see if they met the standard required.

The wording of Article 49 TFEU (ex Article 43 EC) itself suggests that it only applies to rules which discriminate against non-nationals, and not to those which apply equally to the nationals of the host state:

freedom of establishment shall include the right to take up and pursue activities as self-employed persons and to set up and manage undertakings… under the conditions laid down for its own nationals by the law of the country where such establishment is effected.

Early cases followed this approach: see Case 182/83 Fearon [1984] ECR 3677. In Case C-379/92 Peralta [1994] ECR I-3453, which concerned national technical rules applicable to maritime transport, the Court held that a Member State was entitled to impose its own rules on non-national companies established there and that this did not infringe Article 49 TFEU (ex Article 43 EC):

the difficulties which might arise for those undertakings from that situation did not affect the freedom of establishment within the meaning of Article 52 [pre-Amsterdam numbering, now Article 49 TFEU] (paragraph 34 of the judgment).

However it is clear that Article 49 TFEU (ex Article 43 EC) does apply to national rules which, while nominally applying to both nationals and non-nationals, are indirectly discriminatory since they will be more difficult for non-nationals to comply with: see Klopp (Case 107/83 Klopp [1984] ECR 2971).

Another case illustrating this wider approach is Case 19/92 Kraus [1993] ECR I-1663. A German national obtained an LLM degree in Scotland but was not allowed to use this title in Germany without specific permission. Breach of this rule would expose him to a fine or up to a year’s imprisonment! The Court held that it would make the exercise of the fundamental right to free movement less attractive if people could not use the titles they had gained in another Member State. Echoing the language of Cassis, the Court held that such a rule could only be applied if it pursued a legitimate aim compatible with the European Treaties and was justified by compelling reasons in the general interest and did not go beyond what was necessary for achieving the aim in view. It held that, in the absence of harmonisation, Member States could regulate the use of degree titles provided the conditions were not excessive or disproportionate.

Recently there has been a trend towards applying this Cassis-style approach to persons. In C-55/94 Gebhard v Consiglio Dell’Ordine Degli Avvocati e Procuratori di Milano [1995] ECR I-4165, the Court of Justice held that Italian rules prohibiting the establishment of chambers by non-national lawyers in the host state were subject to


scrutiny under European Union law. National rules on access to establishment could only be imposed on non-nationals if four conditions were met:

the rules were applied in a non-discriminatory manner

they were justified by an overriding general interest

they were a suitable means of achieving the objective

they did not go beyond what was necessary.

This is the same test as under the Cassis ‘mandatory requirements’ doctrine in relation to the free movement of goods. The Court said that the concept of ‘establishment’ in the Treaty is a distinct European Union concept which could not, of itself, be conditional on the criteria governing the practise of a particular profession in each Member State.

In this case, the Court of Justice explicitly widened the scope of Article 49 TFEU (ex Article 43 EC) to cover non-discriminatory rules which are ‘liable to hinder or make less attractive the exercise of fundamental freedoms guaranteed by the Treaty’.

Case C-438/05 International Transport Workers’ Federation, Finnish Seamen’s Union v Viking Line ABP, OÜ Viking Line Eesti [2007] ECR I-10779 is an interesting illustration of the scope of Article 49 TFEU (ex Article 43 EC) and also the problems created for work forces in Member States where wages are relatively high (probably reflecting a higher cost of living) by the flexibility given to companies to move their operations to Member States where labour costs are lower (see also below, Case C-341/05 Laval section 12.3.5).

The background to the case is that the Finnish company Viking operates seven vessels, including one called the Rosella, on the Tallinn (Estonia)–Helsinki (Finland) route. Because of direct competition from Estonian vessels paying low wages to its seamen, the Viking line had been losing money for a long time on this route. When Estonia became a member of the EU in 2004 the company decided to reflag the ship, the Rosella, by registering it in Estonia, enabling the company to enter a new collective agreement in regard to wages with an Estonian trade union. This is what is known as registration of a ship under a ‘Flag of Convenience’ (FOC), since the ship benefits from the lower costs of regulation incurred in the country of registration, while the profits are remitted to the country where the beneficial owner, in this case Finland, is established. The International Transport Workers’ Federation (ITF), which is an international federation of transport workers’ unions with its headquarters in London and the Finnish Seamen’s Union (FSU) threatened strike action to force the company to negotiate its collective agreement governing the sailors’ employment and pay with the FSU in Finland. One of the principal ITF policies is its FOC policy. The ITF considers that a vessel is registered under a FOC where the beneficial ownership and control of the vessel lies in a state other than the state of the flag. In accordance with the ITF policy, only unions established in the state of beneficial ownership have the right to conclude collective agreements covering the vessel concerned. The FOC campaign is enforced by boycotts and other solidarity actions among workers. In November 2003, prior to the accession of Estonia, the FSU sent an email to the ITF which referred to the plan to reflag the Rosella when Estonia acceded. The email further stated that ‘the Rosella was beneficially owned in Finland and that FSU therefore kept the right to negotiate with Viking’. As a result, ITF sent a circular (‘the ITF circular’) to its affiliates asking them to refrain from entering into negotiations with Viking or Viking Eesti. The affiliates were expected to follow this recommendation because of the principle of solidarity between trade unions and the sanctions which they could face if they failed to comply with that circular. Consequently, the Estonian unions refused to negotiate with Viking. The FSU then threatened strike action if the company did not negotiate its collective agreement with the FSU (rather than with Estonian unions). The FSU was fully aware of the fact that its principal demand, that in the event of reflagging the crew should continue to be employed on the conditions laid down by Finnish law, would render reflagging pointless, since the whole purpose of such reflagging was to enable Viking to reduce its wage costs.

On 1 May 2004, the Republic of Estonia became a member of the European Union.


As the Rosella continued to run at a loss, Viking pursued its intention to reflag the vessel to Estonia. The ITF circular remained in force so the request to affiliated unions from the ITF in relation to the Rosella remained in effect.

In 2004, Viking brought an action in the High Court in the UK, requesting it to declare that the action taken by the ITF and the FSU was contrary to Article 43 EC (now Article 49 TFEU), to order the withdrawal of the ITF circular and to order the FSU not to infringe the rights which Viking enjoyed under European Union law. The High Court decided the case in Viking’s favour. The current case was a reference from the appeal by the ITF and the FSU in the Court of Appeal claiming, inter alia, that the right of trade unions to take collective action (strike action) to preserve jobs is a fundamental right recognised by Title XI of the EC Treaty and the Charter of Fundamental Rights and Freedoms.

The Court of Justice held that:

i. Article 49 TFEU (ex Article 43 EC) does apply to collective action initiated by a trade union or a group of trade unions against a private undertaking in order to induce that undertaking to enter into a collective agreement, the terms of which are liable to deter it from exercising freedom of establishment.

ii. Article 49 TFEU (ex Article 43 EC) could be invoked horizontally by a company against a trade union or an association of trade unions.

Collective action which seeks to induce a private undertaking whose registered office is in a given Member State to enter into a collective work agreement with a trade union established in that State and to apply the terms set out in that agreement to the employees of a subsidiary of that undertaking established in another Member State, constitutes a restriction within Article 49 TFEU (ex Article 43 EC). However, such a strike may be justified by an overriding reason of public interest, such as the protection of workers, provided that it is established that the restriction is suitable for ensuring the attainment of the legitimate objective pursued. Even if the strike action could be justified by the objective of protecting workers, it was essential that the jobs or conditions of employment at issue were jeopardised or under serious threat. The means used by the union would still have to be evaluated to ensure that they were proportionate and passed the alternative means test. The application of the proportionality principle in this case was left to the national court.

Note that while equally applicable national rules can be applied to non-nationals if the rules fulfil the test in Gebhard; rules which directly discriminate against non-nationals can only be justified under Article 52 TFEU (ex Article 46 EC), (see below).

Self-assessment questions1. What is the test for deciding whether an activity is governed by Article 49 TFEU

(ex Article 43 EC) (establishment) or Article 56 TFEU (ex Article 49 EC) (services)?

2. In which case did the Court hold that Article 49 TFEU (ex Article 43 EC) was directly effective?

3. Why was it originally thought that Article 49 TFEU (ex Article 43 EC) would only apply to discriminatory measures?

4. What is meant by indirect discrimination in relation to establishment?

5. What is meant by an ‘equally applicable measure’?

6. Which types of measure are caught by Article 49 TFEU (ex Article 43 EC)?

7. What is the test laid down in Gebhard and to which types of measure does it apply?

13.2.4 Primary and secondary establishment of companies

Transfer of establishment to another Member State

In Case 81/87 Daily Mail [1988] ECR 5500, it was held that, because of the differing national rules on companies, Article 49 TFEU (ex Article 43 EC) conferred no directly effective right to transfer a company’s principal place of business to another Member


State without restrictions. The UK was entitled to lay down conditions (concerning payment of tax) for consent to transfer the business out of the UK.

Secondary establishment

Primary establishment is where a person or company goes to another Member State and permanently establishes themselves there; secondary establishment is where a person or company established in one Member State also establishes themselves in another Member State. The right of establishment includes the right of secondary establishment – continuing to operate in the home state while establishing branches or subsidiaries or agencies in other Member States.

Case 107/83 Klopp [1984] ECR 2971 shows that the right to be established in more than one state applies to natural persons as well as companies. A French rule required lawyers to have chambers within the jurisdiction of the court where they were registered and prohibited them from having any chambers outside that area. The French law in this case was a ban on secondary establishment. Klopp, a German lawyer who wanted to keep his practice in Germany and to practise in Paris as well, successfully challenged this on the basis of Article 49 TFEU (ex Article 43 EC). The Court of Justice said that the right of freedom of establishment included the right to maintain more than one establishment. Member States could regulate activities within their territories but not in such a way as to require complete relocation.

Note that the national rule in this case is a form of indirect discrimination: French lawyers are far more likely to comply with the requirement to have their chambers within the jurisdiction of the French court than a lawyer from another Member State.

In Case C-140/03 Commission v Greece [2005] ECR I-3177 a Greek rule that did not permit a qualified optician to operate more than one optician’s shop was similarly held to be unlawful despite, in the words of the Court of Justice ‘the absence of discrimination on grounds of nationality’.

Differences in national company law mean that it may be easier to establish a business in another Member State. In Case 212/97 Centros Ltd v Erhvervs-og Selskabsstyrelsen [1999] ECR I-1459 the issue was whether it was lawful for a company to avoid the requirements of the home Member State by establishing a company in another Member State but then continuing to carry out its business activities only in the home state through a branch set up in that State.

Danish nationals set up a company in the UK to avoid the requirement of a minimum share capital of £20,000 when setting up a company in Denmark. In the UK, companies could be formed and enjoy the advantages of limited liability with a share capital of £100. The company carried out no activity in the UK; all its business was carried out by a branch in Denmark. The Danish authorities refused to register the Danish branch because it would, in fact, be the principal establishment of the company.

The Court of Justice held that the Danish authorities were not entitled to refuse registration of the branch. A company could be formed in one Member State for the purpose of creating secondary establishment in another Member State, and the fact that this was done to avoid minimum capital requirements was immaterial. It was not an abuse of Article 49 TFEU (ex Article 43 EC) for nationals of one Member State to choose to form a company in another Member State whose rules on company law were less restrictive (in this case, requiring a low threshold of minimum capital requirements), and then to set up branches (secondary establishment) in other Member States and carry out most, or even all of its business in those other Member States.

Craig and de Búrca note (p.809) that ‘this outcome caused considerable surprise’.

In a similar ruling in Case C-208/00 Uberseering BV v Nordic Construction Company [2002] ECR I-9919, Germany refused to accept that a branch of a company registered in the UK had legal capacity in Germany. The company had transferred its de facto headquarters to Germany. Germany said it should have been properly constituted under German law as that was its real base. The Court held that this would be a denial of the UK registered company’s right to establish a branch in Germany.


Case 167/01 Kamer van Koophandel en Fabrieken voor Amsterdam v Inspire Article Ltd [2003] ECR I-10155 concerned restrictions imposed on secondary establishment rather than a prohibition of secondary establishment. A company was established (incorporated) in the United Kingdom in order to avoid the more stringent requirements of Dutch law for incorporation of a company; this company sought to set up a branch (secondary establishment) in the Netherlands through which it would then carry out most of its business. The Dutch authorities did not refuse to register the branch but tried to impose requirements of minimum share capital and directors’ liability on it. The Court of Justice, while accepting that some restrictions might be permitted if justified and proportionate, held that these restrictions were disproportionate to the objectives of protecting creditors and ensuring effective tax inspections and fairness in business dealings.

13.2.5 Taxation of companies and Article 49 TFEU (ex Article 43 EC)

Case C-446/03 Marks and Spencer plc v David Halsey (Her Majesty’s Inspector of Taxes) [2005] ECR I-10837

Under UK tax provisions it is possible for a parent company and its subsidiaries, which are all resident in the UK, to deduct losses incurred by one member of the group against the taxable profits of other companies of the group.

However, this is not possible when the subsidiary that has incurred the loss is established in another Member State. Subsidiaries of Marks and Spencer established in Belgium, France and Germany had incurred losses and had been closed down. The Court of Justice held that the fact that those losses could not be offset against the profits of the parent company in the UK was a breach of Article 49 TFEU (ex Article 43 EC).

The Court accepted the objective justifications put forward by the UK government, which included, for example, the possibility that companies might always choose to use the tax relief from losses against taxable profits received in the country with the highest rate of tax, but these rules were not proportionate in this case because they extended to circumstances where the subsidiary had incurred losses but then had ceased business. Therefore there was no possibility for those losses to be offset against taxable profits in the Member State in which the subsidiary was established. If the company could not do this, it would lose the benefit of being able to offset its losses against tax altogether.

Case C-196/04 Cadbury Schweppes and Cadbury Schweppes Overseas [2006] ECR I-7995 was concerned with the question of whether it was an abuse of the freedom of establishment for a company established in a Member State to set up and capitalise companies in another Member State solely to take advantage of the more favourable tax regime in that State. The Court held that it was not an abuse. However, it stated that national measures to prevent this could be objectively justified if the measures were to prevent artificial arrangements designed to escape the tax normally due on the profits generated by activities carried out in that country.

Self-assessment questions 1. Explain what is meant by secondary establishment.

2. Is it lawful for a Member State to require a lawyer who wishes to practise within its jurisdiction to only be established in that Member State?

3. Why is such a requirement referred to as ‘indirect discrimination’?

4. Can a company be formed in any Member State, even if there is no intention that it will carry on any business there?

5. Is it an abuse of Freedom of Establishment for a company to be incorporated in a Member State where the requirements for share capital are very low and then to carry out all its business in another Member State through a subsidiary?


13.2.6 Exceptions


to provide and receive services’, sections 11.24–11.37, pp.371–377; Chapter 12: ‘Citizenship and free movement of persons: workers and establishment’, section 12.70–12.88, pp.414–422.

Craig and de Búrca, Chapter 22: ‘Freedom of establishment and to provide services’, pp.802–803 and 826–831.

Article 52 TFEU (ex Article 46 EC) provides for derogation from the right of establishment and right to provide/receive services on the same grounds as for workers: public policy, public security and public health.

Directive 2004/38 applies, and the case law interpreting these requirements is the same as for the free movement of workers (see Chapter 12).

Article 51 TFEU (ex Article 45 EC) allows Member States to exclude activities ‘connected even occasionally with the exercise of official authority’. As with the ‘public service’ exception under Article 39(4) EC, the Court has interpreted this provision narrowly. See Case 2/74 Reyners v Belgium [1974] ECR 631 in which practice as a lawyer was held not to be covered, and Case C-42/92 Thijssen [1993] ECR I-4047.

13.2.7 Mutual recognition of qualifications


persons: workers and establishment’, section 12.57, 12.68, 12.69 and 12.109–12.112, pp.408, 413, 433-–435.

Craig and de Búrca, Chapter 22: ‘Freedom of establishment and to provide service’, pp.798–805 and pp.836–841.

Articles 49(2), 53(1), 53(2) TFEU (ex Articles 43(2), 47(1), 47(2) EC), Directive 2005/36.

Principle of mutual recognition†

As stated above, the early approach of the European Union to the differing qualification requirements in each Member State was that it could only be resolved through a gradual process of adoption of individual Directives for each profession (architects, nurses, dentists etc.).

The Court, however, through a line of cases in the 1970s and 1980s, short-circuited this lengthy process by imposing obligations on Member States based directly on Article 49 TFEU (ex Article 43 EC). This began with Case 2/74 Reyners (above), dealing with any direct discrimination on grounds of nationality. The Court of Justice went on to develop the principle of mutual recognition of national professional qualifications.

In Case 71/76 Thieffry [1977] ECR 765 the Court said that in certain circumstances the authorities of a Member State should recognise a qualification obtained in another Member State. Thieffry, a Belgian national with a Belgian law degree, had been allowed to take the French professional examination, but had then been refused admission to the Paris bar because he did not have a French law degree. As the authorities had accepted his Belgian degree as equivalent for academic purposes, they should not then deny its equivalence when it came to professional practice.

The duty to recognise qualifications obtained in another Member State was taken a stage further in Case 222/86 UNECTEF v Heylens [1987] ECR 4097. Heylens was a qualified Belgian football trainer. When he applied for a job in France, the French Ministry of Sport refused to recognise his qualification. While acknowledging that Member States are entitled to lay down conditions of access to an occupation, the Court of Justice said that this right had to be reconciled with the right of free movement. Member States must ‘assure themselves, on an objective basis, whether the foreign diploma

† This area can also be examined in problem questions on free movement of workers.


is equivalent’. They could have regard to the nature and duration of the training undertaken. Reasons must be given for refusal to recognise qualifications and there must be a right to judicial review of such refusal.

In Case 340/89 Vlassopoulou [1991] ECR I-2357, the Court took a further step by holding that, where there is a shortfall in the applicant’s formal qualifications, the Member State must examine his/her experience to see if it makes up the difference. Failure to do so would amount to indirect discrimination. Ms Vlassopoulou was a Greek national and a member of the Athens bar. She specialised in German law and was working in Germany. She was refused admission to the German bar because she lacked German legal qualifications. The Court said that although national rules on qualifications were equally applicable, they hindered free movement. National authorities must compare the qualifications held with the national requirements and accept them it they are equivalent. If not equivalent, the Member State must also look at the additional knowledge and experience the person had gained in the host state.

The initial approach of the European Union institutions was to harmonise training requirements for entry to different professions on a sector-by-sector basis, implemented by sector specific Directives. However, in practice, agreement as to what the minimum qualifications requirements for each profession should be, was not easily reached. For example, agreement on the Directive on Architects (Directive 85/384) took 17 years to draft. Therefore, reflecting the Court’s approach (which mirrors its approach to mutual recognition of goods under Cassis), a series of Directives on the Mutual Recognition of Qualifications was adopted. Rather than harmonising the requirements for each profession in turn, these Directives provided for the mutual recognition of qualifications, subject to necessary safeguards. The three Directives adopted in this area (Council Directives 89/48, 92/51 and European Parliament and Council Directive 1999/42), have now been repealed and replaced by one Directive, Directive 2005/36. This Directive also incorporates the 12 sectoral Directives which cover the seven professions of doctor, nurse, dental practitioner, vetinary surgeon, midwife, pharmacist and architect (Title III Chapter III Articles 21–49). (The date for implementation of the Directive was October 20 2007.)

Title II covers the Free Provision of Services and Title III covers Freedom of Establishment. Title III Chapter I follows the same approach of mutual recognition as the three Directives 89/48, 92/51 and 1999/42 above, with some changes and additions. Notice that where the applicant has the minimum qualifications required under the Directive in regard to the professions dealt with in Chapter III (doctor, nurse, dental practitioner, vetinary surgeon, midwife, pharmacist and architect) the applicant is entitled to automatic recognition of their qualifications and therefore the automatic right to pursue the profession in the Member State to which they have moved (host state). On the other hand, in Title III, Chapter 1, covering mutual recognition, the applicant only has the right that the authorities of the host Member State should consider their qualifications (as in Vlassopoulou) and then stipulate requirements for making up any shortfall as permitted under the Directive (for detailed discussion, see below). The Directive goes beyond the earlier Directives by also covering the Freedom to Provide Services (Title II).

13.2.8 Directive 2005/36 on the recognition of professional qualifications See http://europa.eu/scadplus/leg/en/cha/c11065.htm on the reform of the system for the recognition of professional qualifications.

Title I General Provisions

This sets out the purpose and scope of the Directive, and, in Article 3, provides a list of definitions of terms used.

Title II Free Provision of Services

Article 5.2 sets out the distinction between the provision of Services and Establishment, echoing Gebhard.


Any national of a Member State legally established in a given Member State may provide services on a temporary and occasional basis in another Member State under their home state (Member State of Establishment) original professional title (Article 7.3) without having to apply for recognition of their qualifications (Article 5.1a).

If the profession in question is not regulated in the Member State of Establishment (home state), and service providers actually relocate outside of their Member State of Establishment in order to provide services, they must provide evidence of at least two years’ professional experience in the previous ten years (Article 5.1b).

The host Member State may require the service provider to make a declaration prior to providing any services on its territory (and renew it annually) giving details of any insurance cover or other means of personal or collective protection with regard to professional liability (Article 7.1).

The host Member State may also require the first application to be accompanied by certain documents listed in the Directive, such as proof of the nationality of the service provider, of their legal establishment and of their professional qualifications (Article 7.2).

For professions which have public health or safety implications and do not benefit from automatic recognition, the host Member State may carry out a prior check of the service provider’s professional qualifications within the limits of the principle of proportionality (Article 7.4).

Where the service is provided under the professional title of the Member State of Establishment, the competent authorities of the host Member State may require service providers to furnish the recipient of the service with certain information, making it possible to check the service provider’s qualifications and supply other information relating to their insurance coverage against the financial risks connected with any challenge to their professional liability (Article 9).

Title III Freedom of Establishment

Chapter I General System for the Recognition of Evidence of TrainingThis Chapter covers all professions not covered by Chapter II (industrial, commercial and craft activities formally covered by Directive 1999/42) and Chapter III (professions listed above) of Title III.

The explanatory note issued by the Commission explains that this system applies as a fallback to all the professions not covered by specific rules of recognition and to certain situations where the migrant professional does not meet the conditions set out in other recognition schemes.

This general system is based on the principle of mutual recognition, while permitting the application of compensatory measures if there are substantial differences between the training acquired by the migrant and the training required in the host Member State. The compensatory measure may take the form of an adaptation period (defined in Article 3.1g) or an aptitude test (defined in Article 3.1h). The choice between one or other of these tests is up to the migrant unless specific derogations exist.

Article 13.1 states that where access to or pursuit of a profession is regulated (i.e. subject to possession of specific professional qualifications) the applicant shall be allowed access to that profession in the ‘host’ Member State, provided that the applicant holds training qualifications obtained in another Member State which confirm that the applicant has a level of training at least equivalent to the level immediately below that required in the host Member State.

If the Member State of the applicant (home state) does not require specific professional qualifications for access to the relevant profession, the applicant should, in order to be able to gain access to the profession in a host Member State which does regulate that profession, provide proof of two years of full-time professional experience over the preceding ten years on top of the qualification (Article 13.2).


In a new development, the new Directive sets out five levels of professional qualifications (Article 11).

The lowest is the ‘attestation of competence’ which corresponds to primary or secondary education ‘attesting that the holder has acquired general knowledge’ (Article 11a(ii)) and similar qualifications such as three years’ professional experience.

Article 11(d) and (e) (equivalent to the earlier Directive 89/48) refer to diplomas certifying successful completion of training at post-secondary level of a duration of at least one year, or professional training which is comparable in terms of responsibilities and functions, after the completition of (d): a three year university course or (e): a four year university course or the equivalents part-time. Article 11(d) covers the requirements for qualification as a solicitor or barrister in the United Kingdom when the two year training contract (solicitors) or two six-month pupillages (barristers) is complete.

Article 14: Requirements which may be imposed by the host Member StateWhere the following conditions are fulfilled the Member State may make recognition of qualifications subject to the applicant’s completing either an aptitude test (Article 3.1h) or adaptation period (Article 3.1h) of a maximum of three years) if:

the training is one year shorter than that required by the host Member State Article 14.1a or

the training received covers substantially different matters to those covered by the evidence of formal training required in the host Member State Article 14.1b or

the profession in the host Member State includes one or more regulated professional activities which do not exist in the corresponding profession in the applicant’s home Member State (Article 14.1c).

The host Member State must offer the applicant the choice between an adaptation period and an aptitude test (Article 14.2) except for professions which require precise knowledge of national law where the Member State can decide which it is to be (Article 14.3).

Another innovation in this Directive is the concept of ‘common platforms’, defined as a set of criteria of professional qualifications which are suitable for compensating for substantial differences which have been identified between the training requirements existing in the various Member States for a given profession (Article 15). Where an applicant’s professional qualifications satisfy the criteria in the ‘common platform’ the host Member State will waive the necessity for the aptitude test or adaption period.

Article 53 allows the host state to require the applicant to have the ‘requisite knowledge of languages’ necessary for pursuing the profession.

The new Directive also imposes strict time limits for Member States to respond to requests for recognition of qualifications and to give full reasons for refusing them (Article 51).

Note that Directive 89/48, the forerunner to Directive 2005/36, did not come into force until January 1991 and so was not available for Vlassopoulou. Vlassopoulou’s situation would now be covered by Directive 2005/36. The general principle of mutual recognition under Article 43, laid down in Vlassopoulou, would still apply in any area not covered by the Directive.

Case C-313/01 Morgenbesser [2003] ECR I-3467 concerned the rights of trainee lawyers and the recognition of diplomas. The Italian bar refused to accept the enrolment of a French trainee lawyer who had worked as a trainee lawyer in France before moving to Italy, on the basis that she did not have the Italian legal qualifications recognised by an Italian university. The Court of Justice held that while the Lawyers’ Establishment Directive and Directives on Mutual Recognition only applied to qualified lawyers, Articles 39 and 43 EC required that the host state considered the skills, experience and education of trainee lawyers from other Member States and that they should then grant exemptions as appropriate; European Union law did not allow the authorities of a Member State to refuse to enrol the holder of a legal diploma obtained in another


Member State in the register of persons starting the necessary period of practice for admission to the bar, only because they did not have the legal diploma issued or recognised in the host state.

Lawyer’s establishment: The Lawyers’ Directive

Directive 98/5 to facilitate practice of the profession of lawyer on a permanent basis in a Member State other than that in which the qualification was obtained.

Since the late 1970s there has been a Directive providing for the cross-border activities of lawyers on a temporary basis (Directive 77/249, OJ 1977 L78/17). But for permanent establishment, each Member State had its own rules which non-nationals had to comply with. There was no provision allowing a lawyer to set up in another Member State using his or her home country title and without ‘re-qualifying’ for the profession in the host state.

This was eventually resolved by Directive 98/5 on Lawyer’s Home Title, which allows a lawyer qualified in one Member State to practise under that title in another Member State.

Article 1 of that Directive states:

The purpose of this Directive is to facilitate practice of the profession of lawyer on a permanent basis in a self-employed or salaried capacity in a Member State other than that in which the professional qualification was obtained.

The Directive allows lawyers who have not gone through the process described above under Directive 2005/36 to practise under home title in the host Member State and eventually be integrated into the practice of the host state without the aptitude test or adaptation period.

The lawyer must initially practise under home state title and must register with the competent authorities (Article 3). He or she can then give advice on EC law, home state law, host state law and international law (Article 5). There is a derogation for those Member States which restrict the category of lawyers who are authorised to carry out probate, the administration of wills and conveyancing, permitting those Member States to exclude lawyers practising under home title from these activities (Article 5.2).

Where Member States reserve the right to appear in court to lawyers practising under the professional title of that Member State, the lawyer practising under home state title may be required to work in conjunction with a local lawyer, who would be answerable to the relevant authorities of the host Member State (Article 5).

Lawyers working under home title will be subject to the professional rules of conduct for lawyers of the host state (Article 6).

Lawyers practising under home state title who have ‘effectively and regularly pursued’ the practice of law, including host state and European Union law, are permitted, after at least three years’ practise, to be admitted to the profession of lawyer in the host state without the requirement of an adaptation period or aptitude (Article 10.1). The alternative process under Directive 2005/36 does remain open to them, of course. The lawyers themselves must give evidence of their ‘effective and regular pursuit’ (Article 10.2). If the lawyer has practised in the host state for three years, but has practised the law of the host state for less time, he or she can still be admitted to the profession in the host state if he or she produces evidence of knowledge and experience; the person can be required to go through an interview to assess his or her competence (Article 10.3). Reasons must be given for a refusal to admit the lawyer (Article 10.1).

The Court held in two parallel cases that the provisions of Luxembourg law, making the registration of lawyers who have obtained their professional qualification in another Member State subject to a prior test to establish proficiency in the three national languages, were incompatible with Directive 98/5.

In two parallel cases, Case C-506/04 Wilson [2006] ECR I-8613 and Case C-193/05 Commission v Luxembourg [2006] ECR I-8673) the Court stated that presentation of a


certificate attesting to registration in the home Member State (Article 3 of the Directive) is the only condition which can be imposed before the person is registered to practise under his home country professional title registration in the host Member State.

The Court pointed out that in this regard, the lack of a system of prior testing of knowledge under the Directive is accompanied by a set of rules ensuring the protection of consumers and the proper administration of justice, in particular, the obligation on the lawyer to practise under his or her home country professional title and the obligation of professional conduct not to handle matters for which he or she lacks competence, for instance, owing to lack of linguistic knowledge.

In Wilson, the Court also found that Luxembourg legislation was not compatible with Article 9 of the Directive which requires that a remedy must be available before a court or tribunal where a decision is made refusing registration.

The Court considered that a sufficient guarantee of impartiality was not ensured, because decisions refusing registration were subject to review by a body composed exclusively – at first instance, or for the most part, on appeal – of national lawyers. An appeal to the Luxembourg Court of Cassation enabled judicial review of the law only and not the facts.

Can nationals rely on Article 49 TFEU (ex Article 43 EC) against their home state?

Article 49 TFEU (ex Article 43 EC) states that ‘restrictions on the freedom of establishment of nationals of a Member State in the territory of another Member State shall be prohibited’ (emphasis added). In past case law, the Court of Justice has held that individuals may not rely on Article 49 TFEU (ex Article 43 EC) against their home state for recognition of qualifications received in another Member State. See: Case 136/78 Auer (1) [1979] ECR 437 (French vet). However, where the matter is governed by a Directive, they may rely on the Directive against their home state. See: Case 115/78 Knoors [1979] ECR 399 (Dutch plumber).

Since virtually all situations pertaining to recognition of qualifications are now covered by the Directive 2005/36, this distinction is of less importance; generally, the individual will be able to use Article 49 TFEU (ex Article 43 EC), in conjunction with the Directive, against their home state.

Where a particular profession is covered by the Directive, a Member State may no longer insist on compliance with its own requirements by people, even its own nationals, who have qualified in another Member State in accordance with the terms of the Directive.

However, an individual cannot evade the more stringent requirements in his or her own Member State by training in another Member State where the requirements for qualification for the profession are set lower. Case C-61/89 Bouchoucha [1990] ECR I-3551 concerned a French individual who obtained a qualification as an osteopath in the United Kingdom and then tried to practise in France, where one had to be a qualified doctor in order to practise as an osteopath. The Court of Justice held that provided that the restriction imposed was not arbitrary, as was the case here, there was no breach of Article 49 TFEU (ex Article 43 EC).

Recognition of third country qualifications

In Case 154/93 Tawil-Albertini [1994] ECR I-451, a French national had qualified as a dentist in Lebanon. Belgium had recognised his qualification, but it was held that this did not bind France. A bilateral arrangement whereby one Member State accepted the qualifications of a non-Member State did not oblige other Member States to accept them.

However, in Case 319/92 Haim [1994] ECR I-425, an Italian national had qualified as a dentist in Turkey. His qualification was not recognised under the EC Directive for dentists, but he had worked for eight years in Belgium. He was refused employment in the German social security scheme and told he needed two more years’ training. Following Vlassopoulou, the Court said that Article 43 required the German authorities


to compare his qualifications to see if he had covered the knowledge required, and to take into account the experience gained in another Member State when deciding whether its training requirements were met.

This case also dealt with the Member State’s right to impose language requirements on the migrant dentist. This would now be covered by Article 53 of Directive 2005/36 (see above).

The basic principle of non-discrimination laid down by Article 49 TFEU (ex Article 43 EC), as interpreted in Vlassopoulou, cannot be limited by the terms of any Directive. So the mere fact that a particular qualification is not listed in the Directive, giving automatic right to recognition, does not mean a Member State can refuse to accept it – even if it was obtained in a non-Member State: see C-238/98 Hocsman [2000] ECR I-6623, paragraph 23, and C-31/00 Dreessen [2002] ECR I-663.

Self-assessment questions1. Which Directive provides for mutual recognition of qualifications?

2. What is meant by a ‘regulated profession’?

3. Which case sets out the obligations of Member States in relation to recognition of qualifications under Article 49 TFEU (ex Article 43 EC), in the absence of a relevant Directive?

4. Is a Member State required to recognise qualifications obtained outside the EU?

5. Must a Member State recognise the qualifications of non-EU nationals to carry out a regulated profession within the EU?

Activity 13.2Write a short advice to the following clients, identifying relevant European Union Directives and case law:

a. Maria, a Portuguese national, has been refused a post in an English state secondary school on the grounds that she does not have a degree from an English university or the relevant English teaching qualification. Maria has a Portuguese teaching diploma.

b. Sara, an Irish national, has been refused permission to practise as a physiotherapist in Sweden. She obtained her physiotherapy diploma from a college in Japan. Her diploma was recognised by Denmark as equivalent to the Danish qualification, and Sara has worked for several years in Denmark.

c. Saeed, a national of Egypt, has been refused the right to practise as an architect in France, which does not recognise his qualification from the Spanish Architecture Association.

Activity 13.3 a. Explain what is meant by the principle of ‘Mutual Recognition of Qualifications’

b. Explain which Article of Directive 2005/36 can be used to ensure mutual recognition of an equivalent professional qualification achieved in one Member State in another Member State.

c. Read Article 14 of Directive 2005/36 and explain what happens if the training for the professional qualification is either one year shorter in the host Member State or the training in the host Member State covers substantially different matters from the training in the home Member State.

d. Explain what additional ‘right’ the host Member State authorities have in regard to mutual recognition of qualifications which require precise knowledge of national law.


e. If an EU qualified lawyer is happy to establish in another Member State and to practise under his/her home title initially, explain the procedure under Article 5 of Directive 98/5 which allows him/her to do so.

f. Can the migrant lawyer use this Directive in order to become integrated into the legal profession of the host Member State?


13.3 Services


to provide and receive services’, pp.359–384.

Craig and de Búrca, Chapter 22: ‘Freedom of establishment and to provide service’, pp.813–836.

Articles 56–62 TFEU (ex Articles 49–55 EC).

13.3.1 Scope of the service provisionsThe freedom to provide services is a ‘residual’ category, which means that it covers those areas not covered by other provisions relating to free movement of goods, capital and persons (workers and establishment). In 1957, when the Treaty of Rome was signed, services were regarded as a marginal sector of the EC economy. Since then, the provision of services (including financial services and insurance) has become much more important and now constitutes about 70 per cent of the EU economy.

The provision of services can take place in a number of ways: some involving the movement of persons, but others not involving any movement of persons and being more analogous to the free movement of goods, for example:

the supplier of the service goes to another Member State to carry out the service

the consumer of the service goes to another Member State to receive the service.

Cross-frontier supplies of services not involving any movement of either the provider or the consumer

The analogy between goods and cross-frontier services of the third type (e.g. banking or insurance services) has led the Court to apply the same approach as to goods: namely to require Member States to justify the application of national rules to cross-frontier services and show that it is necessary and proportionate to do so.

The structure of the Treaty provisions is as follows.

Article 56 TFEU (ex Article 49 EC): basic rule abolishing restrictions on freedom to provide services.

Article 57 TFEU (ex Article 50 EC): definition of services.

Article 58 TFEU (ex Article 51 EC): specific provision for the transport sector.

Articles 59 TFEU (ex Article 52 EC): power to issue Directives.

Article 61 TFEU (ex Article 54 EC): non-discrimination transitional provision.

Article 62 TFEU (ex Article 55 EC): applies to services, the derogations on grounds of public policy, public security and public health, and for activities connected with the exercise of official authority.

Entry and residence

Directive 73/148 applied to service providers and their families and is now replaced by Directive 2004/38.


The direct effect of Article 56 TFEU (ex Article 49 EC)

The Case 33/74 Van Binsbergen [1974] ECR 1299 established that Article 56 TFEU (ex Article 49 EC) has direct effect.

Extension of Article 56 TFEU (ex Article 49 EC) to cover recipients of services

Although Article 56 TFEU (ex Article 49 EC) covers the freedom to provide services, the Court of Justice has in effect extended the Treaty by interpreting Article 56 TFEU (ex Article 49 EC) to include the freedom to receive services. In Case 286/72 Luisi and Carbone [1984] ECR 377 two Italians travelling to another Member State as tourists and for medical treatment were covered by Article 56 TFEU (ex Article 49 EC).

A British tourist in Paris was a recipient of services under Article 56 TFEU (ex Article 49 EC) and came within the scope of the Treaty. As such the prohibition of discrimination on grounds of nationality laid down in Article 12 EC applied to him and he was entitled to receive criminal injury compensation on the same basis as French nationals: see Case 186/87 Cowan [1989] ECR 95.

This extension has been especially important in the field of education – see Case 293/83 Gravier v City of Liege [1985] ECR 593.

The definition of services

According to Article 57 TFEU (ex Article 50 EC), two things characterise ‘services’: they are temporary in nature, and are ‘normally provided for remuneration’. In relation to the first point, see Case 55/94 Gebhard v Consiglio Dell’Ordine Degli Avvocati e Procuratori di Milano [1995] ECR I-4165 (above).

The requirement for remuneration means that, for example, a national education system would not be covered as it is normally publicly funded. It can be difficult to draw a clear line between services of an economic nature and non-profit-making ones. In Case 263/86 Belgium v Humbel [1988] ECR 5365 [1989] 1 CMLR 393, a state school operating within the national educational system was held not to be providing services. However, a school in the private sector, which aims to operate for a profit and is financed by private means (i.e. the fees paid by pupils and their parents) is a provider of services under Article 56 TFEU (ex Article 49 EC): see Case C-109/92 Wirth [1993] ECR I-6447.

13.3.2 Discrimination on grounds of nationality, establishment or residenceIn Case 33/74 Van Binsbergen [1974] ECR 1399, the Court held that a rule which required a person to be ‘habitually resident’ in the host state in order to provide legal representation services there would deprive Article 56 TFEU (ex Article 49 EC) of all effect. It amounted to indirect discrimination on grounds of nationality since the requirement to be established in the Netherlands would be easier for nationals to comply with. The Court accepted that in some cases a residence requirement may be necessary to ensure the application of professional rules of conduct, but only if supervision could not be achieved by less restrictive means. In other words, the means of achieving a justified aim or objective it must be proportionate.

As with Article 49 TFEU (ex Article 43 EC), the wording of Article 57 TFEU (ex Article 50 EC) suggests that it amounts to no more than a rule against discrimination: non-nationals must be allowed to provide services ‘on the same conditions as are imposed by the state on its own nationals’. However, the Court of Justice has not interpreted this to mean that a Member State can impose all its local rules and conditions on non-national service providers. It has required objective justification and proportionality.

Home or host state control?

A factor in deciding whether a host state’s requirements are necessary and proportionate is whether the control or supervision is adequately carried out by the service provider’s home state. In Case 279/80 Webb [1981] ECR 3305, an employment

Go to your study pack and read the extract from Case 186/87 Ian William Cowan v Trésor public.

Go to your study pack and read the extract from Case 33/74 Van Binsbergen v Bestuur von de Bedrijfsvereniging voor de Metaalnijverheid.


agency in the UK supplied temporary staff in the Netherlands. It had a licence under UK law but Dutch law also required it to have a Dutch licence. The Court accepted that the licensing of employment agencies was legitimate and in the public interest, to avoid abuses and protect the workers involved. But imposing the Dutch rules was only justified if those interests were not already protected by the home state. As the Dutch rules duplicated the protection provided by the UK rules, it was not necessary to require a Dutch licence as well.

The Court developed this approach in Case 205/84 Commission v Germany (Insurance Services) [1986] ECR 3755. Germany argued that Article 57 TFEU (ex Article 50 EC) entitled it to require insurers to be established and authorised in the same way as German insurers. The Court held that Article 57 TFEU (ex Article 50 EC) does not mean that all legislation applicable to those permanently established can be applied ‘en bloc’ to service providers, particularly where to do so would deprive Articles 56–57 TFEU (ex Article 49–50 EC) of all useful effect. For restrictions to be imposed on service providers, it must be shown that:

the rules are objectively justified by a public interest

the interest is not adequately protected by regulations and controls in the home Member State

the rules are proportionate.

Applying this test to the German requirements, the Court accepted that there was a public interest in ensuring the financial stability of insurance companies so as to protect consumers. The insurance sector is particularly sensitive because it is difficult for consumers to evaluate the financial stability of an insurance company and because of the long period which may elapse between paying for the service (in annual premiums) and receiving the benefit (when making a claim). There had been some harmonisation of the conditions to be met by insurers, so Germany would be able to obtain this information from the home state of the company concerned. On the other hand, there were no European Union rules on the amount of reserves to be held, so Germany was entitled to require compliance with its own rules on this. Consequently, the requirement for authorisation was necessary and proportionate, but the requirement for companies to be established in Germany was ‘the very negation of the fundamental freedom to provide services’. It was disproportionate since the authorisation procedure could be based on documentation from the home state and this was enough to enable the authorities to check that the company had sufficient assets to cover its risks.

The risk of harm

From the above cases, we can see that, in applying the proportionality test to rules on services, the Court pays great attention to the nature of the services involved: the more serious the risk of harm to the public, the more likely it is that restrictions will be allowed.

On the other hand, where the risk of harm is small, the Court is less likely to find justification for restrictions on those who can provide the service: see the ‘tourist guide’ Cases: C-154, 180, 198/89 Commission v France, Italy and Greece [1991] ECR I-659, 709, 727. These states required tour guides to hold a particular national qualification in order to be licensed to act as a guide. This prevented tour companies from using their own staff, and prevented self-employed guides from other Member States from offering their services to tour companies. While the Court accepted that the aim – of ensuring correct information was given about the artistic and cultural heritage – was legitimate, it held that the licence requirement was disproportionate and that competition between tour companies would tend to make them use competent guides anyway.

Significantly, in this case, the Court does not simply accept the national rules on qualifications for guides and merely require Member States to compare the qualifications of guides from other Member States to see if they are equivalent

Go to your study pack and read paragraphs 25–33 and 42–51 of the extracts from Case 205/84 Commission v Germany and France.


(principle of mutual recognition). It questions the right of the Member States to impose the licence requirement on them at all. Article 56 TFEU (ex Article 49 EC) is used here to challenge an area traditionally accepted as within Member States’ competence, that is, the right, in the absence of harmonisation, to lay down its own rules on the exercise of a trade or profession.

13.3.3 Equally applicable rules The first explicit statement by the Court that Article 56 TFEU (ex Article 49 EC) applies to equally applicable rules came in Case C-76/90 Säger v Dennemeyer [1991] ECR I-4221, [1993] 3 CMLR 639. German law on provision of patent renewal services reserved the right to operate this service, which consisted of sending out reminders that patents were about to expire and then dealing with the renewal process, to patent agents and lawyers. Dennemeyer, a UK company, provided such services to clients throughout the EC and especially in Germany. It operated lawfully in the UK but did not meet the requirements of the German law. A German competitor, Säger, brought an action to prevent Dennemeyer from operating in Germany. The Court held that Article 56 TFEU (ex Article 49 EC) requires not only the elimination of all discrimination against a person providing services on the ground of his nationality but also the abolition of any restriction, even if it is non-discriminatory, if it is liable to prohibit or otherwise impede the activities of a provider of services established in another Member State where he lawfully provides similar services. The emphasis here is on whether there is a restriction on the provision of services. The Court of Justice considered the German rules and held that while they might be justified to protect the recipients of the services in question from poor legal advice, the requirements were disproportionate. It held (see Commission v Germany above) that the freedom to provide services may be limited only by national rules which are non-discriminatory, justified by imperative reasons relating to the public interest and non-discriminatory and in so far as that interest is not already protected by the rules in the home state; the requirements must also be necessary and proportionate.

This approach, where ‘restrictions’ on the freedom to provide services are subjected to the requirements of objective justification and proportionality has been widely applied by the Court (see for example Cases C-369 and 376/96 Arblade [1999] ECR I-8453 and C-36/02 Omega [2004] ECR I-9609 below).

Joined Cases C-94/04 and C-202/04 Cipolla v Fazari [2006] ECR I-11421 judgment of 5 December 2006

The case concerned the application to lawyers established in other Member States and providing services in Italy of an Italian law which prohibited any derogation from the minimum fees for lawyers’ services.

The Court of Justice held this to be a restriction on the provision of services under Article 56 TFEU (ex Article 49 EC). The prohibition deprived lawyers established in another Member State of the possibility of requesting fees lower than those set by the scale, and thereby competing more effectively with lawyers established in the Member State concerned, who had greater opportunities for winning clients than lawyers established abroad. It also limited the choice of service recipients in Italy, because they could not choose to take advantage of the services of lawyers established in other Member States who would offer their services at a lower rate than the minimum fees set by the scale in Italy.

It was for the national court to decide whether the requirements were proportionate, and the Court of Justice directed the national court to take into account whether there is a correlation between the level of fees and the quality of the services provided by lawyers and whether, in particular, the setting of such minimum fees constitutes an appropriate measure for attaining the objectives pursued, namely the protection of consumers and the proper administration of justice, by preventing lawyers from offering services of mediocre quality. The question was to be considered within the context of the Italian market which is characterised by an extremely large number of lawyers and who might therefore be encouraged to compete against each other by

Go to your study pack and read paragraphs 12–20 of the extract from Case C-76/90 Manfred Säger v Dennemeyer & Co. Ltd.


possibly offering services at a discount, with the risk of deterioration in the quality of the services provided. Account should also be taken of the fact that consumers of legal services are not equipped to assess the technical knowledge and proficiency of their lawyers.

Which state’s rules apply when neither provider nor recipient travels?

In Case C-384/93 Alpine Investments BV v Minister van Financien [1995] ECR I-1141, the Netherlands had introduced rules prohibiting ‘cold calling’ (uninvited telephone sales) for the sale of commodities on the futures market to non-professional investors. These were risky investment products and there had been complaints that customers were given inadequate warning of the risks. Alpine, a company established in the Netherlands, used this sales method to contact potential customers in the UK, where this sales method was allowed.

The restriction was imposed by the home state of establishment, but restricted freedom to offer services in another state. One issue was whether the company could plead Article 56 TFEU (ex Article 49 EC) against its own home state in this situation. The Court of Justice held that it could as:

the right freely to provide services may be relied on by an undertaking as against the state in which it is established if the services are provided for persons established in another Member State.

Seeking to draw an analogy with the Keck ruling in relation to goods (see Chapter 10), the Dutch and UK governments argued that the Dutch rule merely affected the way in which the services could be offered. This was rejected by the Court of Justice because the rule ‘directly affects access to the market in services in the other Member State and is thus capable of hindering intra-Community trade in services’. Although the Dutch rule breached Article 56 TFEU (ex Article 49 EC), it was held to be justified and proportionate, on the grounds of protecting the reputation of the Dutch financial sector.

Using Article 56 TFEU (ex Article 49 EC) against the home state

In a number of cases, the provider of services has used Article 56 TFEU (ex Article 49 EC) against the home state. A notable example is Case C-384/93 Alpine Investments discussed above.

A case which also illustrates the very wide remit that the Court has given to Article 56 TFEU (ex Article 49 EC) is Case C-60/00 Carpenter [2002] ECR I-9607.

Mary Carpenter was a Philippine national who arrived in the UK in 1994 and was given leave to remain as a visitor for six months. She overstayed her visa and did not apply for an extension. She then married Peter Carpenter, a British national; it was accepted by the UK immigration authorities that this was a genuine marriage. Peter Carpenter ran a business, established in the UK, selling advertising space in medical and scientific journals and a significant proportion of this business involved selling advertising space to advertisers established in other Member States. He was therefore a provider of services, established in his home state. Mrs Carpenter applied to the Secretary of State for leave to remain in the UK as the spouse of a British national. This was refused and an order was made against her for deportation.

The Court of Justice held that Mr Carpenter, who, as a provider of services was within the scope of Article 56 TFEU (ex Article 49 EC), could rely on Free Movement of Services and the right to respect for his family life (derived from Article 8 of the ECHR) against his own Member State. While Mrs Carpenter had infringed immigration law in the UK by overstaying her six-month leave to stay in the UK, to deport her would be disproportionate to the aim of protecting public order and security

Case C-224/97 Ciola [1999] ECR I-2517 concerned a restriction imposed by the Austrian authorities on the number of moorings on Lake Constance which could be held by boat-owners resident in other Member State. The right to provide services was successfully invoked by Mr Ciola against his own Member State (Austria) when he was prosecuted for breaching this rule.

Go to your study pack and read paragraphs 21, 27, 28, 30 and 40–56 of the extract from Case C-384/93 Alpine Investments BV v Minister van Financiën.


Activity 13.4Although the outcome in Säger and Alpine differed, the approach of the Court is the same in both cases.

a. Does the service in question come within the scope of European Union law (for this, there must be some inter-state element)?

b. Is it being restricted?

c. Is that restriction justified by an overriding interest?

d. Is the restriction objectively necessary to protect that interest?

e. Is it proportionate?

f. In Säger, the national measure was disproportionate, whereas in Alpine it was not. Examine the reasoning in these two cases. Can they be reconciled? Is the Court adopting a consistent approach?

SummaryThere has been a gradual alignment of the test applied to non-discriminatory national rules which are restrictions on one of the fundamental freedoms. In relation to the freedom to provide services, such restrictions are lawful only if:

they are justified for imperative reasons relating to the public interest

they are applied to service providers in so far as they have not already been regulated in the home state

the result cannot be achieved by less restrictive means.

13.3.4 Illegal and ‘immoral’ services These cases show the problems for the free provision of services that result from differing Member States’ rules on aspects of public morality and public policy. Generally, the Court has shown greater readiness to respect national rules in this area.

In Case 159/90 Society for the Protection of the Unborn Child (SPUC) v Grogan [1991] ECR I-4685, [1991] 3 CMLR 849, an Irish student organisation gave out leaflets about abortion services available in the UK, in breach of an Irish rule against distribution of such information. The Court avoided having to decide whether a legitimate interest was being protected – by holding that, as the students were not themselves connected with the service providers, they were not covered by Article 56 TFEU (ex Article 49 EC).†

The Court’s approach emerges more clearly in Case 275/92 Customs and Excise Commissioners v Schindler and Schindler [1994] ECR I-1039. It held that the UK rules against large-scale lotteries, which prevented the promotion in the UK of a German lottery were justified. The Court noted that lotteries were controlled to different extents in different Member States but said that this was acceptable ‘in the light of the specific social and cultural features of each Member State, to maintain order in society…’. It was not up to the Court to substitute its assessment for that of the Member States.

In Case C-268/99 Jany [2001] ECR I-8614, prostitution was held to be a service where the person providing the service was working outside any relationship of subordination in return for remuneration paid to that person directly and in full.

In Case C-6/01 Anomar v Portugal [2003] ECR I-8621 Portuguese rules restricting gambling to casinos or other licensed venues fell within the margin of discretion enjoyed by Member States on grounds of social policy and prevention of fraud. In Case C-42/02 Lindman [2003] ECR I-3519, Finnish (discriminatory) rules which treated winnings from lotteries held in other Member States as taxable income while winnings from lotteries held in Finland were not taxable, were held to be contrary to Article 56 TFEU (ex Article 49 EC). There have been a number of other cases concerning gambling. See: Case 124/97 Laara [1999] ECR I-606, Case C-243/01 Gambelli [2003] ECR I-13031.

† It is interesting to note that Advocate General van Gerven, who did examine the merits of the case in his Opinion, concluded that protection of the unborn child was a legitimate objective and that the restriction was justified under Article 52 TFEU (ex Article 46 EC), the public policy exception, as a moral or philosophical choice which a Member State was entitled to make.


Protection of human rights

An interesting case highlighting the differences in attitudes between Member States is C-36/02 Omega Spielhallen v Bonn [2004] ECR I-199, [2005] 1 CMLR 5.† In the UK, laser games in which people simulate gun-battles with each other are a popular form of entertainment, especially fashionable for children’s parties! Yet in Germany, such games are regarded as trivialising violence and infringing the fundamental right of human dignity guaranteed in the German constitution. Omega was forbidden to introduce such a game in its ‘laserdrome’ in Bonn and argued this was a breach of Article 56 TFEU (ex Article 49 EC). The Court said that protection of fundamental human rights is an obligation imposed by Community law, even in relation to a fundamental freedom such as that to provide services.

However, the way such rights were protected might vary between Member States:

It is not indispensable in that respect for the restrictive measure issued by the authorities of a Member State to correspond to a conception shared by all Member States as regards the precise way in which the fundamental right or legitimate interest in question is to be protected.

The German prohibition was justified under Article 52 TFEU (ex Article 46 EC) on public policy grounds.

Another recent example of the Court upholding a national restriction restricting provision of services is Case C-262/02 Commission v France (Loi Evin) [2004] ECR I-6569. The Loi Evin forbade TV advertising of alcoholic drinks. This restricted the showing of sporting events on French television channels because alcohol adverts might be displayed on hoardings, for example around the football pitch. The Court cited the Alpine approach whereby the fact that other states allowed such adverts did not mean France’s rule was disproportionate.

SummaryIn relation to ethical issues, the Court of Justice applies a less strict test of proportionality than it does in relation to restrictions in more straightforward economic contexts such as in Säger or Alpine. European Union law requires respect for human rights, but there is also respect for each Member State’s right to interpret what this involves in terms of the activities permitted on its territory.

13.3.5 Employees of service-providing companiesIn Case C-113/89 Rush Portuguesa [1990] ECR I-1417, the Court held that the right of a Portuguese company to provide construction services in France under Article 56 TFEU (ex Article 49 EC) included the right to use its own employees to provide the services. The Court dismissed France’s concern that this might threaten the stability of the labour market in France as the activity would only be temporary:

At the time of this case, the Portuguese Accession Treaty provided for freedom to provide services immediately, but not the free movement of workers, for whom work-permits were still required.

In Case 43/93 Van der Elst [1994] ECR I-3803, a Belgian company sent four Moroccan staff, who were ‘lawfully and habitually employed’ by the company, to work on a demolition project in France. The French authorities could not require work permits for them as this would constitute a restriction on the company’s ability to provide services in France. Such restrictions were only justified if they were necessary or proportionate. However, the host state could insist on the workers being paid the minimum wage.

In Cases 369/96 and 376/96 Arblade and Leloup [1999] ECR I-8453, two French companies providing services in Belgium were prosecuted for failure to comply with Belgian social legislation governing employment.

Requirements to issue each worker with an individual record and other paperwork formalities in Belgium were held to be prohibited by Articles 56 and 57 TFEU (ex Articles 49 and 50 EC) since such paperwork was already maintained in the home state: it was imposing a dual regulatory burden.

† Compare with the Schmidberger case on this issue in the chapter on free movement of goods.


However, it was lawful to require that the companies kept such documentation available in the host state so that the latter could monitor compliance with legislation safeguarding workers.

Following Van der Elst, it was unclear whether the right to deploy non-EU employees in other Member States only applied to employees who were ‘habitually employed’ (i.e. part of the company’s permanent workforce). This issue was settled in Case C-445/03 Commission v Luxembourg [2004] ECR I-191, [2005] 1 CMLR 22. Luxembourg required work permits when a service provider established in another Member State wished to deploy its non-EU national workers in Luxembourg. The grant of a permit was ‘subject to considerations relating to the employment market and to the existence of a contract of indefinite duration and previous employment with the same service provider for a period of at least six months’. The Court held that these requirements were unjustified restrictions on the freedom to provide services and breached Article 56 TFEU (ex Article 49 EC).

Case C-341/05 Laval un Partneri Ltd v Svenska Byggnadsarbetareförbundet Judgment of 18 December, 2007

The case concerned collective action organised by the Swedish building and public works trade union, Svenska Byggnadsarbetareförbundet, against a Latvian company, Laval, which had posted construction workers from Latvia to work on its building projects in Sweden.

Directive 96/71/EC permits Member States to impose minimum working conditions corresponding to those in force under national rules of the host state on employers from another Member State using posted workers; however Sweden did not set minimum rates of pay (in Sweden, employees’ remuneration is decided on by management and labour by way of collective negotiations) and therefore pay conditions could not be imposed on a company established in another Member State employing workers in Sweden.

The union negotiated with Laval over pay rates for its workers (none of whom were members of the union and 65 per cent of whom were Latvian). When they failed to reach agreement, the union organised a blockade of Laval’s sites preventing the delivery of goods onto the site, placing pickets and preventing Latvian workers and vehicles from entering the site. Laval asked the police for assistance but they explained that since the collective action was lawful under national law they were not allowed to intervene. A sympathy strike by the electrician’s union meant that no electrician would agree to work for Laval. The company finally was forced to withdraw its work force and was declared bankrupt. The reference was from a court hearing its action for damages.

The Court of Justice held that Article 56 TFEU (ex Article 49 EC) has horizontal effect against associations or organisations not governed by public law.

It then stated that the right to take collective action (to strike) was reaffirmed by the Charter of Fundamental Rights of the European Union, and must be recognised as a fundamental right of EU law. The right to take collective action for the protection of the workers of the host state against possible social dumping may constitute an overriding reason of public interest. However, the right to strike in order to force undertakings established in other Member States to sign a collective agreement for the building sector which was not covered by the Posted Workers’ Directive (because of Sweden’s lack of minimum pay rates) could not be justified. Swedish law on workers’ rights (the ‘MBL’) prohibited a trade union from taking collective action with the intention of circumventing a collective agreement concluded by other parties. However, this prohibition only applied when the action was in regard to action against an agreement regulated by Swedish law. This meant that only Swedish agreements are protected from strike action; the prohibition was not applicable to collective action against a foreign undertaking which is temporarily active in Sweden and which brings its own workforce. Although the collective action is similarly aimed at forcing the company to set aside a collective agreement concluded with workers, Swedish law does not prohibit strike action because the collective agreement that the Unions are


trying to have set aside is governed by the law of another Member State, in this case Latvia. The Court of Justice held that this was directly discriminatory and therefore could only be justified on the narrow grounds set out in Article 52 TFEU (ex Article 46 EC), public policy, public security or public health, which did not cover the particular case. Therefore the Swedish law which permitted the strike action against the company established in Latvia, which was intended to force the company to set aside the collective agreement it had reached with its Latvian work force, was in breach of Article 56 TFEU (ex Article 49 EC).

13.3.6 Healthcare servicesA line of cases has dealt with the freedom of patients to seek health services in another Member State and be reimbursed by their national social security/insurance schemes.

In Case 158/96 Kohll v Union des Caisses de Maladie [1998] ECR I-1931, Mr Kohll, from Luxembourg, obtained orthodontic treatment for his daughter in Germany and then sought reimbursement from the Luxembourg social security system at the rate set in Luxembourg. The Luxembourg authorities refused on the grounds that prior authorisation had to be obtained for treatment to be carried out in another Member State.

The Court of Justice held that the requirement for prior authorisation as a prerequisite for re-imbursement was contrary to Articles 56 and 57 TFEU (ex Articles 49 and 50 EC) on free movement of services. Restrictions on the freedom to receive services in other Member States could only be justified if there was a risk of seriously undermining the financial balance of the social security system.

In C-157/99 Geraets-Smits v Stichting Ziekenfonds VGZ [2001] ECR I-5473 and Peerbooms v Stichting CZ Groep Zorgverzekeringen, Dutch citizens obtained medical care at hospitals in Member States outside the Netherlands and tried to recover the costs from the Dutch sickness insurance funds with whom they were registered for healthcare costs. These funds, which are part of the social security system, had contractual arrangements with a number of hospitals and when treatment was obtained at one of these hospitals there was no need for prior authorisation.

For treatment at any other hospital, whether in the Netherlands or in another Member State, prior authorisation was required and was subject to conditions.

The Court of Justice held that the provision of the medical services at issue did constitute services under Article 57 TFEU (ex Articles 50 EC): the provision of treatment at a hospital paid for by a Member State’s social services system was a service within Articles 56 and 57 TFEU (ex Articles 49 and 50 EC).

The Court of Justice held that the requirement for prior authorisation for treatment provided in a hospital in another Member State was justified on the grounds of public health under Article 46 EC and could be subject to the conditions laid down:

that the treatment must be ‘normal in the professional circles concerned’, and

that the medical treatment must be necessary.

However, to be proportionate, these conditions must not be imposed restrictively.

The requirement that the treatment should be ‘normal in the professional circles concerned’ must be interpreted to mean that it ‘is sufficiently tried and tested by international medical science’ (to ensure that it is assessed according to international and not just national criteria).

Authorisation can be refused on the grounds of lack of medical necessity only if the same or equally effective treatment can be obtained without undue delay in a hospital having a contractual arrangement with the insured person’s sickness fund.

In C-385/99 Muller-Faure and van Riet [2003] ECR I-4509, the same approach was taken to the Netherlands Health Scheme, which was a ‘benefits in kind’ similar to the British NHS, in which patients receive treatment free at the point of use. They were still entitled to obtain medical services in other Member States, although a requirement of prior authorisation was justified.

Go to your study pack and read Newdick, C. ‘Citizenship, Free Movement and Health Care: Cementing Individual Rights by Corroding Social Solidarity’, 2006, CMLRev 43: 1645–1668.Kay Hailbronner, ‘Union Citizenship and Access to Social Benefits’, 2005, CMLRev 42: 1245–1267.

Go to your study pack and read paragraphs 77-107 of the extracts from Case C-157/99 Geraets-Smits v Stichting Ziekenfonds VGZ and Peerbooms v Stichting CZ Groep Zorgverzekeringen.


See also Case C-56/01 Inizan v Caisse Primaire d’Assurances Maladie des Hauts de Seine [2003] ECR I-12403, in which prior authorisation could be required for treatment outside France, but could only be refused if the ‘same or equally effective treatment for the patient’ could be obtained in France without undue delay.

The Court stressed that because prior authorisation requirements hinder the exercise of a fundamental freedom, they must be based on objective, non-discriminatory criteria which are known in advance, so that national authorities do not use their discretion arbitrarily. There must be:

a procedural system which is easily accessible and capable of ensuring that a request for authorisation will be dealt with objectively and impartially within a reasonable time and refusals to grant authorisation must also be capable of being challenged in judicial or quasi-judicial proceedings.

See also the judgment in C-8/02 Leichtle [2004] ECR I-2641.

In relation to medical tests, however, the Court condemned, as a breach of Article 56 TFEU (ex Article 49 EC), a French rule under which French sickness insurance funds refused to reimburse the cost of tests done in medical laboratories outside France. This rule was not justified on grounds of public health under Article 46 EC: see Case C-496/01 Commission v France [2004] ECR I-2351.

In Case C-372/04 The Queen, on the application of Yvonne Watts v Bedford Primary Care Trust [2006] ECR I-4325 the Court of Justice ruled that the UK National Health Service (NHS) was obliged to refund the costs of hospital treatment obtained in another Member State, if the patient concerned was faced with an ‘undue delay’ in the UK. The claimant in the UK proceedings, who suffered from arthritis, applied to Bedford Primary Care Trust (PCT) for authorisation to receive a hip replacement abroad as she was facing a one-year wait for her operation. She was refused. The Court of Justice held that that she could rely on Article 56 TFEU (ex Article 49 EC). It held that although the prior authorisation system governing NHS reimbursement of the cost of hospital treatment elsewhere in the EU was a deterrent to patients from seeking such treatment, it was justified and proportionate.

However, where the delay in offering treatment in the home state exceeds a medically acceptable time period (in the light of all the circumstances of the case), the competent authorities may not refuse authorisation because of the existence of waiting lists, the alleged distortion of the normal priorities, the fact that hospital treatment is offered free of charge and/or a comparison between the cost of the treatment provided in the host Member State and the cost of that treatment in the Member State of residence.

This case will clearly have a significant impact on the provision of healthcare in the United Kingdom.

13.3.7 The new Services Directive: Directive 2006/123Directive 2006/123 on services in the internal market was adopted in 2006. The drafting of the Directive was the subject of much controversy because the original conception envisaged home state regulation on the service provider in a host state. This was a completely different approach from that of the existing law on Article 56 TFEU (ex Article 49 EC), as contained in the case law of the Court. This case law does not interfere with the principle of host state control but makes restrictions on Free Movement of Services subject, as we have seen, to requirements of equality of treatment, objective justification and proportionality. After strong representations from a number of Member States, host state regulation is now enshrined as the operating principle of the Directive.

The Directive places a number of procedural requirements on Member States to ensure that the procedures and formalities that apply to service provision are kept simple and that relevant formalities can be completed at a single point of contact (Articles 5–8).

Go to your study pack and read paragraphs 119–120 of the extract from Case C-372/04 R (Watts) v Bedford Primary Care Trust and Secretary of State for Health.


The Court of Justice’s case law in regard to restrictions on provision of services is codified in Article 16: provision of services cannot be restricted unless the measure is non-discriminatory, objectively justified and proportionate. However, the grounds on which provision of services can be justified are limited to reasons of public policy, public security, public health or the protection of the environment, which is narrower than the grounds used in the case law of the Court. Host Member States are permitted to enforce their rules on employment conditions, including those laid down in collective agreements against the service provider.

Self-assessment questions1. In what circumstances can a Member State prevent a person from travelling to

another Member State for medical treatment?

2. Is it lawful to require such a person to obtain approval in advance?

3. Does it make a difference whether the national health service is an insurance-based scheme or a ‘free at point of use’ scheme?

SummaryThese judgments illustrate the potential conflict between the efforts of national health schemes and systems to control their budgets, ration resources geographically or by other criteria, with the fundamental right of patients to seek provision of services in other Member States. The Court’s compromise allows restrictions such as a requirement for prior approval, but only permits that approval to be refused if the home state can provide equivalent care itself ‘without undue delay’.

Useful further reading Fuchs, M. ‘Free movement of services and social security – Quo vadis?’, European

Law Journal, 8(4) 2008, pp.536–555.

Hatzopoulos, V. and Thien Uyen Do: ‘The case law of the ECJ concerning the free provision of services 2000-2005’, CMLRev 43 2006, pp.923–991.

Sample examination questionsQuestion 1 What is the distinction between the right of establishment and the freedom to provide services, and why is the distinction important in European Union law?

Question 2 Elena is a graduate of the Faculty of Engineering at the University of Athens and a member of the Athens professional engineers’ organisation. She wishes to practise her profession in Spain, either by opening an office in Madrid or by hiring a secretary there and visiting Madrid for a day every two weeks. She makes contact with the Spanish professional association and is informed that:

a. her engineering degree from Athens is not recognised in Spain as equivalent to a Spanish engineering degree

b. the rules of the Spanish professional association do not permit an engineer to have more than one office anywhere in the EC

c. so far as the Spanish professional association is aware, EU law does not yet provide for the freedom to provide engineering services.

Elena consults you concerning her rights, if any, under EU law.


Advice on answering the questionsQuestion 1 Explain the definitions of services, Article 57 TFEU (ex Article 50 EC), and establishment as defined in Gebhard, and the test for distinguishing between them as laid down in that case. The main reason for the importance in drawing this distinction is because it affects the extent to which a Member State can impose its own rules on companies/persons from other Member States. Cite the line of cases upholding the right of a Member State to require compliance with its rules if established in its territory (for example Peralta). Contrast with cases such as Webb and Commission v Germany (Insurance Cases), in which home state control may be sufficient in relation to service providers. A good answer, however, would discuss how the Court’s approach to establishment has evolved and that acceptance of the host states’ rules is no longer inevitable: in Gebhard, the Court subjected those rules to the same test as used in relation to restrictions on the other fundamental freedoms (Legitimate aim? Necessary? Proportionate?). While the same test may be used in relation to restrictions on both services and establishment, this does not mean the outcome will be the same. Restrictions on establishment are much more likely to be found to be proportionate, because there is still the basic view that Member States are entitled to regulate the activities of people/companies on their territory. Restrictions on services are subject to more rigorous scrutiny and will only be accepted if it can be shown that the supervision of the activity by the home state is inadequate (cite Säger, Alpine).

Question 2

a. Engineering is a ‘regulated activity’ in Spain, for the purposes of Directive 2005/36 on Mutual Recognition of Qualifications, if it can only be pursued by a person holding a particular qualification or who is a member of a particular professional association. Under that Directive, Spain cannot simply refuse to recognise Elena’s degree because it is not Spanish. It can, under Article 14 of the Directive, examine her qualification: if it involved a substantially shorter period of study (at least a year less), Spain can require her to have experience of twice that length to compensate. If the content of her degree is substantially different in what it entitles her to do, Spain may require an aptitude test or adaptation period.

b. This is a breach of Article 49 TFEU (ex Article 43 EC), freedom of establishment, which gives the right to dual/multiple establishments; cite the case of Klopp which shows that this right applies to natural persons, not just to companies.

c. Article 56 TFEU (ex Article 49 EC) on freedom to provide services has been held to be directly effective (Van Binsbergen). That means an individual can rely on it even in the absence of any specific implementing Directive in relation to engineering. Under Gebhard, a service provider is entitled to have an office or other premises in the host state (i.e. the infrastructure necessary for them to perform the services in question). We are not specifically asked to decide whether Elena comes under the services or the establishment provisions, but it would be a good idea to point out that, of her two alternative plans, the first is likely to be covered by Article 49 TFEU (ex Article 43 EC) establishment and her second by Article 56 TFEU (ex Article 49 EC). However, this would ultimately depend on findings of fact as laid down in Gebhard: it would depend on how much time she spent working in Spain, how often she worked there, etc.


Reflect and review







Ready to move on


Need to study again

I can explain the differences between the freedom of establishment and the freedom to provide/receive services.

I can explain the legal basis for the principle of non-discrimination on grounds of nationality in relation to services and establishment.

I can apply Articles 49 and 56 TFEU (ex Articles 43 and 49 EC) to problems.

I can explain and apply the general rules on mutual recognition of qualifications.

I can explain the circumstances in which a host state can impose its own rules on the provision of services by persons based in another Member State.

I can explain the grounds on which restrictions on the free movement of services or establishment can be justified.

I can explain the effect of the ‘official authority’ derogation.


Must revise

Revision done

13.1 The distinction between services and establishment

13.2 Establishment

13.3 Services


Notes

14 Freedom from discrimination

Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 294

14.1 Article 157 TFEU (ex Article 141 EC) – equal pay for equal work . . . . . . 295

14.2 Equal treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 303

14.3 The general principle of non-discrimination . . . . . . . . . . . . . . . 308



Introduction

This chapter covers the law relating to the prohibition of discrimination in the EU. Included in the original EEC treaty as the principle of equal pay for equal work for men and women, the reach of the principle has been significantly expanded by the enactment of a number of Directives by the legislature and also by the expansive interpretation of the law by the Court of Justice. The Court has expanded the reach of Article 157 TFEU (ex Article 141 EC) considerably by adopting a very broad interpretation of the meaning of ‘pay’ and also by including indirect discrimination within the scope of the Article. Article 157 TFEU (ex Article 141 EC) has been held to be both vertically and horizontally directly effective.

A similarly generous interpretation has been applied to the secondary legislation, the most important of which is the Equal Treatment Directive (the ETD), Directive 76/207 (now replaced by Directive 2006/54).

The result has been the development of a general principle of equality or non-discrimination by the Court of Justice.

The ToA added Article 13 EC (now Article 19 TFEU) to the Treaty which provides a legal base for legislation prohibiting discrimination on the grounds of sex, racial or ethnic origin, religion or belief, disability, age or sexual orientation, and so far two Directives have been enacted on this legal base: Council Directive 2000/43/EC of 29 June 2000, implementing the principle of equal treatment between persons irrespective of racial or ethnic origin, and Council Directive 2000/78/EC of 27 November 2000 establishing a general framework for equal treatment in employment and occupation. This Directive deals with all the remaining forms of discrimination listed under Article 19 TFEU (ex Article 13 EC). It refers to the fundamental rights principles contained in Article 6 of the Treaty on European Union, to the European Human Rights Convention (ECHR) and to general principles which result from ‘the constitutional traditions common to the Member States’.

The main legal instruments in this area are:

Article 157 TFEU (ex Article 141 EC)

Directive 2006/54 on the implementation of the principle of equal treatment of men and women in matters of employment and occupation (recast)

Equal Treatment Directive 76/207 (replaced by Directive 2006/54)

Equal Pay Directive 75/117 (replaced by Directive 2006/54)

Social Security Directive 79/7

Parental Leave Directive 96/34

Occupational Social Security Directive 86/378

Pregnancy Directive 92/85

Burden of Proof Directive 97/80 (replaced by Directive 2006/54)

Part-time Workers’ Directive 97/81

Directives 2000/78 and 2000/43.

Learning outcomes By the end of this chapter and the relevant reading, you should be able to:

give an account of the case law of the Court of Justice that has expanded the meaning of pay

explain the difference between the treatment of access to the state pension and to occupational pensions under Article 157 TFEU

name the case that established direct effect of Article 157 TFEU (ex Article 141 EC) and explain why it was necessary to limit the retrospective effect of that judgment

EU Law 14 Freedom from discrimination page 295

explain ‘indirect’ discrimination

explain what is meant by ‘objective justification’ in regard to apparent sex discrimination

explain what is meant by ‘work of equal value’ with reference to case law

give examples of what is covered by the requirement for ‘equal treatment’ in Articles 14–16 Directive 2006/54 (formerly the Equal Treatment Directives (the ETD))

explain how the pregnant woman is protected from failure to be appointed and from dismissal because of pregnancy

explain the significance of Case C-144/04 Werner Mangold v Rüdiger Helm and Case C-555/07 Seda Kücükdeveci in terms of elevating the principle of equality to a general principle

explain how Article 19 TFEU (ex Article 13 EC) extends the principle of non-discrimination.

14.1 Article 157 TFEU (ex Article 141 EC) – equal pay for equal work

Essential reading Horspool and Humphreys, Chapter 16: ‘Discrimination law: from sex

discrimination in employment to a general equality principle’, sections 16.1–19.26, pp.565–577; sections 16.52–16.73, pp.589–598.

Craig and de Búrca, Chapter 24: ‘Equal treatment of women and men’, pp.874–907.

14.1.1 Prohibition of pay discrimination Article 157 TFEU (ex Article 141 EC) is the Treaty provision that prohibits discrimination in pay between men and women. Initially this was limited to the principle that men and women should receive equal pay for equal work, but it has been widened to include ‘equal pay for work of equal value’ by the ToA. The Article was also amended to permit positive action; the final paragraph provides the basis for positive action for the ‘under-represented sex to pursue a vocational activity… to prevent or compensate for disadvantages in professional careers’.

Article 141 EC (now Article 157 TFEU) has been expansively interpreted, with very far-reaching consequences, by the Court of Justice in two respects:

in regard to the meaning of ‘pay’

by the extension of the scope of the Article to cover indirect discrimination.

Defrenne v Sabena

The case that decided that Article 141 EC (now Article 157 TFEU) had direct effect was: Case 43/75 Defrenne v Sabena (No 2) [1976] ECR 455. In this case the Court stated that Article 141 EC served ‘a double objective’ – both economic and social. It also determined for the first time that Article 141 EC could have direct effect and that the direct effect could be horizontal – Sabena was a private company. The retrospective effect of this judgment was limited to those who had already initiated actions because of the potential financial consequences.

The meaning of ‘pay’

In Case 80/70 Defrenne v Belgium [1971] ECR 445 the Court gave the definition of ‘pay’ for the purposes of Article 141:

any…consideration, whether in cash or kind, whether immediate or future, provided that the worker receives it, albeit indirectly, in respect of his employment from his employer.

In a series of cases the Court then broadened the meaning of ‘pay’ under the Article to include, for example, the following.

Go to your study pack and read the extract from Case 80/70 Gabrielle Defrenne v Belgian State.


1. A travel concession awarded after retirement (Case 12/81 Garland v British Rail Engineering Ltd [1982] ECR 359).

2. Supplementary payments (Case 69/80 Worringham v Lloyds Bank [1981] ECR 797). In this case, male employees at Lloyds Bank under 25 were paid a higher gross salary than women. This was because contributions to a pension scheme were compulsory for men but not for women and the Bank therefore added the additional amount to the men’s salaries. This affected other benefits received by the employees which were related to gross salary. When two female employees of the bank challenged the additional payments, the Court held that this was pay discrimination.

3. An award of compensation for breach of the right not to be unfairly dismissed (Case C-167/97 Seymour-Smith and Perez [1999] ECR I-623).

4. A lump sum maternity benefit (Case 218/98 Abdoulaye v Régie Nationale des Usines Renault [1999] ECR I-5723).

5. Statutory sick pay (Case 171/88 Rinner-Kühn v FWW Spezial-Gebäudereinigung GmbH & Co KG [1989] ECR 2743).

14.1.2 Are pensions included in ‘pay’?

State benefits are excluded from ‘pay’

The question of whether access to pension rights falls under the definition of ‘pay’ depends first of all on whether the payments are state benefits, which are excluded from the definition of pay; see Case 80/70 Defrenne v Belgium [1971] ECR 445. This case established that Article 141 EC (now Article 157 TFEU) does not apply to benefits controlled by legislation. Here, the pension was not pay because:

the pension scheme was directly governed by legislation

there was no agreement or contractual element

the scheme was obligatory for general classes of worker.

Whether the pension is ‘pay’ or a state benefit is very important because social security benefits are governed by Directive 79/7. Article 7 of this Directive allows an exception to the principle of equal treatment for social security benefits in relation to pensionable age and benefits related to it. The exclusion is in respect of the ‘determination of pensionable age for the purposes of granting old-age or retirement pensions and the possible consequences thereof for other benefits’.

Included: supplementary occupational pensions

By contrast, a supplementary occupational pension received ‘by reason of the existence of the employment relationship’ does constitute ‘pay’. See: Case 170/84 Bilka-Kaufhaus GmbH v Weber von Hartz [1986] ECR 1607.

Included: contracted-out occupational pensions

The Court of Justice has, controversially, included contracted-out occupational pensions within the meaning of pay, Case C-262/88 Barber v GRE [1990] ECR I-1889.

Mr Barber worked for the Guardian Royal Exchange insurance group and belonged to a pension scheme entirely set up and paid for by the company – which replaced the statutory scheme. The pension scheme had a normal pensionable age which distinguished between men and women: men retired at 62 and women at 57.

When the company entered into a massive redundancy programme they continued with this pattern of different pensionable ages; men could receive a pension at 55 whereas women were eligible at 50. Mr Barber was made redundant at 52 and therefore had to wait to get a pension – whereas he would have received one straight away had he been a women. The question was whether Mr Barber had been discriminated against. The case turned on the question of whether contracted out occupational

Go to your study pack and read the extract from Case C-167/97 Regina v Secretary of State for Employment, ex parte Nicole Seymour-Smith and Laura Perez.

Go to your study pack and read the extracts from Case 170/84 Bilka-Kaufhaus GmbH v Karin Weber von Hartz and Case C-262/88 Douglas Harvey Barber v Guardian Royal Exchange Assurance Group.


pensions were pay, or were they to be regarded as part of the social security system, like the state pensions in Defrenne 1?

In a highly significant judgment, the Court of Justice determined that contracted-out pension schemes, which operated as substitutes for the state pension scheme, were ‘pay’ under Article 141 EC (now Article 157 TFEU), as they constituted ‘consideration paid by the employer to the worker in respect of his employment‘. The factors taken into account by the Court in deciding this were:

1. the contractual nature of the pension scheme, which was not governed by statute but either by agreement between the employer and the employees or by unilateral decision of the employer

2. the pension scheme was not ‘compulsorily applicable’ to general categories of employees but governed by the company’s own rules

3. the pension scheme was a substitute for the state pension but could be varied and go further than state benefits, meaning it was similar to the supplementary pension scheme in Bilka.

The Barber Protocol

The retrospective application of this judgment would have had severe financial consequences and the Court limited these by confining the retrospective effect of the judgment to those persons who had already initiated actions. However, the wording of this restriction was open to different interpretations, and, because the potential financial consequences were so huge, the Member States clarified the limitation in the Barber Protocol attached to the Maastricht Treaty.

The point to be clarified was whether the judgment, which affected every contracted-out occupational pension scheme in the UK, required equality in payment of pensions after the date of the judgment (for which no financial provision had been made), or equality of claims based on benefits earned after this date.

The Barber Protocol made it clear that the second interpretation was correct: ‘benefits under occupational schemes shall not be considered as remuneration if and so far as they are attributable to periods of employment prior to May 17 1990’ (the date of the judgment).

This interpretation was applied by the Court in Case C-109/91 Ten Oever [1993] ECR I-4879 which also held that an employee’s pension, paid after his death to his widow, is ‘pay’.

For a case limiting the effect of Barber, see Case C-152/91 Neath v Hugh Steeper Ltd [1993] ECR I-6935. In this case, the employer’s contribution to a contracted-out pension scheme was held not to be pay under Article 141 EC (now Article 157 TFEU). The amount paid in varied between men and women based on the use of actuarial factors (statistics) as to life expectancy and other factors.

Self-assessment questions 1. Name the case that established direct effect of Article 157 TFEU (ex Article 141 EC).

2. Was Ms Defrenne’s action against an ‘emanation of the state’ or a private company?

3. Was the Treaty Article vertically or horizontally directly effective?

4. Why was it necessary to limit the retrospective effect of the judgment and how was this done?

5. Cite three cases illustrating the Court’s expansive interpretation of the meaning of pay.

6. Explain the difference between Case 80/70 Defrenne v Belgium and Cases 170/84 Bilka-Kaufhaus and 262/88 Barber.


14.1.3 Indirect discrimination The Court of Justice has extended the scope of Article 141 EC (now Article 157 TFEU) to encompass indirect discrimination. This is where a group of employees – such as part-timers – are paid less, and that group is predominantly of one sex. Most part-time workers are women and a number of cases have established that paying part-timers less, or creating additional hurdles to part-timers receiving benefits that are ‘pay’ under the broad definition established by the Court, constitutes indirect discrimination where a ‘considerably smaller percentage of women than men’ is able to meet the requirement.

In relation to indirect discrimination, see:

Case 96/80 Jenkins v Kingsgate [1981] ECR 911. A female part-time worker was paid less than male full-timers per hour for doing the same work.

Case 170/84 Bilka-Kaufhaus GmbH v Weber von Hartz [1986] ECR 1607. Part-time workers were only given access to a supplementary occupational pension scheme (held to be ‘pay’, see above) after passing a threshold of 15 years’ full-time work.

Case 171/88 Rinner-Kühn v FWW Spezial-Gebäudereinigung GmbH & Co. KG [1989] ECR 2743. German legislation required employers to give six weeks’ paid leave to workers who were ill. Part-timers who worked less than ten hours a week or 45 hours a month did not qualify for this benefit (held to be ‘pay’, see above): this was held to be contrary to Article 141 EC (now Article 157 TFEU).

Equal Opportunities Commission v Secretary of State for Employment [1994] 1 All ER 910. In the UK, under the Employment Protection (Consolidation) Act 1978, the right to make a claim for unfair dismissal or to get a redundancy payment was given to those who worked:

16 hours or more per week – after two years’ employment with the same employer

8–16 hours per week – after fice years’ employment with the same employer

those working under eight hours never received these rights. These rules were held by the House of Lords to be indirect discrimination illegal under Article 141 (now Article 157 TFEU), without making a reference to the Court of Justice of the European Union.

Case C-167/97 Seymour-Smith and Perez [1999] ECR I-623 concerned the rights of workers who had worked less than two years (see below). Direct discrimination under Article 141 EC (now Article 157 TFEU) can never be justified, but indirect discrimination can be justified where there are objective reasons for the discrepancy as the Court held in Bilka-Kaufhaus:

If… the [discriminatory] measures…

1. correspond to a real need on the part of the undertaking, 2. are appropriate with a view to achieving the objectives pursued, 3. [are] necessary to that end.

The fact that the measures affect a greater number of women than men is not sufficient to show that they constitute an infringement of Article [157 TFEU] 119 [EC].

Where the indirect discrimination is in a social security scheme (although the benefit was actually paid by the employer ‘by virtue of the contract of employment’ and therefore was held to fall within Article 141 EC (now Article 157 TFEU)), see Case 171/88 Rinner-Kühn v FWW Spezial-Gebäudereinigung GmbH & Co KG [1989] ECR 2743.

In this case, the test for objective justification is that the rule is justified by a ‘necessary aim’ of social policy and is ‘suitable’ and ‘requisite’.

In Seymour-Smith the Court summarised it thus:

In order to establish whether a measure adopted by a Member State [or company – Article 141 [now Article 157 TFEU] is horizontally directly effective] has a disparate effect as between men and women to such a degree as to constitute indirect discrimination for the


purposes of Article 141 [now Article 157 TFEU] of the Treaty, the national court must verify whether the statistics available indicate that a considerably smaller percentage of women than men is able to fulfil the requirement imposed by that measure. If that is the case there is indirect sex discrimination, unless that measure is justified by objective factors unrelated to any discrimination based on sex.

14.1.4 The burden of proof Where there is evidence of indirect discrimination, it is for the employer to show that it is for reasons unrelated to sex discrimination. This means that where the applicant has established a prima facie case of indirect discrimination, the burden of proof shifts to the employer to justify the discrepancy based on objective justifications. It is also necessary that the means used should be proportionate.

The Court of Justice’s case law is now enshrined in Directive 2006/54, replacing Directive 97/80 (the Burden of Proof Directive).

Where there is no transparency in application of criteria relating to pay, but the system results in women being paid less than men, the burden of proof is on the employer to show that the pay criteria are not discriminatory: Case 108/88 Danfoss [1989] ECR 3199.

This decision has also been codified in the Directive.

14.1.5 Approaching a problem question on indirect discrimination In order to establish indirect discrimination:

The first step is to ask whether one group of workers is being awarded less ‘pay’ (note the expansive definition of pay under Article 157 TFEU (ex Article 141 EC), see above). In order to be eligible for this ‘pay’, is there a requirement (such as being full-time/ having worked full-time for two years) that a ‘considerably smaller percentage of women than men is able to fulfil’? If there is such a requirement, then there is a prima facie case of indirect sex discrimination.

The burden of proof then falls on the employer or national authority to show that the measure is justified by objective factors unrelated to any discrimination based on sex. In order to see if the apparent indirect discrimination is justified, apply the test in Bilka-Kaufhaus:

do the measures correspond to a real need on the part of the undertaking?

Are they appropriate to achieving the objectives pursued; necessary to that end?

The Bilka-Kaufhaus case

It would be helpful to apply some of the justifications that have been tried: Case 170/84 Bilka-Kaufhaus GmbH v Weber von Hartz [1986] ECR 1607.

Bilka offered full-time workers a supplementary occupational pension scheme. Part-timers only had access to the scheme after crossing a threshold of 15 years of previous full-time work. The company claimed to be justified in trying to attract full-time workers by offering them something extra, because part-timers tended to refuse to work on Saturdays and late afternoons and were therefore less economically valuable.

Having laid down the test for justification of indirect discrimination set out above, the Court left it to the national court to inquire into the suitability of other techniques for ensuring the availability of workers on Saturdays and late afternoons. The German national court held that the indirect discrimination was not justified and proportionate.

The Rinner-Kühn case

Case 171/88 Rinner-Kühn v FWW Spezial-Gebäudereinigung GmbH & Co. KG [1989] ECR 2743 concerned provisions passed by the German government which required employers to give six weeks’ pay to workers when ill. This ‘pay’ was not available to those who worked less than ten hours a week or 45 hours a month.


To justify the apparent indirect discrimination, the German government argued that part-timers were less integrated in the concern and less dependent on it. The Court of Justice firmly rejected these arguments as ‘mere generalisations’ and inadequate.

But note that in Case 96/80 Jenkins v Kingsgate [1981] ECR 911 the Court specifically said that paying full-timers might be justified where the employer is endeavouring, on economic grounds which may be objectively justified, to encourage full-time work, irrespective of the sex of the worker.

Directive 2006/54 enshrines the definition of ‘indirect discrimination’ in Article 2(1)(b).

14.1.6 The meaning of equal work See Case 129/79 Macarthys Ltd v Wendy Smith [1980] ECR 1275: a comparison may be made between the pay awarded to a man and woman doing the same work when they are not employed contemporaneously. See Case 43/75 Defrenne v Sabena (No 2) [1976] ECR 455: Air hostesses and male stewards perform the same work.

Work of equal value

Discrimination can also occur where two equivalent professions are paid at different rates and the employees of one profession are predominantly men and of the other, predominantly women: Articles 1 and 2 of Directive 75/117 (replaced by Directive 2006/54).

Case 61/81 Commission v United Kingdom (Re equal pay for equal work) [1982] ECR 2601

The Commission took action against the UK government for failing to take adequate measures to set up a ‘work of equal value’ job classification scheme. See: Case C-127/92 Enderby v Frenchay Health Authority [1993] ECR I-5535. Enderby was a speech therapist which is a predominantly female profession. She claimed that speech therapists were paid less by the Health Authority than equivalent professions, such as clinical psychologists and pharmacists, which were predominantly male. The Court of Justice stated that if pharmacists and speech therapists were performing ‘work of equal value‘ and one of those professions was predominately male and the other female, then there is a prima facie case of sex discrimination if the female profession is less well paid. The burden of proof then shifts to the employer to show that the difference is objectively justified.

Case C-400/93 Royal Copenhagen A/S [1995] ECR I-1275.

Workers were paid on a piece-work basis. Women ended up being paid less overall. The Court of Justice found that there was no discrimination here as the different pay might reflect different levels of output.

Case C-309/97 Angestelltenbetriebsrat v Wiener Gebietskrankenkasse [1999] ECR I-2865.

Two groups of psychotherapists were paid differently and the group that was predominantly female was paid less. However, the qualifications for the two types of psychotherapist were different as the predominantly female group were not trained doctors but only graduate psychologists. Because the qualifications for the two groups were different, there was no discrimination.

Case C-423/04 Richards v Secretary of State for Work and Pensions [2006] ECR I-3585

This concerned the Member State’s refusal to grant a pension to a male–female transsexual at the same age as a female who had not undergone gender reassignment surgery, the Advocate General stated that the correct comparator for analysis is a female who has not undergone gender assignment surgery. The existing derogation from the Directive on Equal Treatment in matters of Social Security determines pensionable ages for men and women and is not legislation determining the sex of the person concerned. The Court of Justice agreed with the AG and found that Article

Go to your study pack and read the extract from Case 129/79 Macarthys Ltd v Wendy Smith.


4(1) of Directive 79/7 EEC precluded legislation denying entitlement to a retirement pension to a person who had undergone gender reassignment on the ground that she had not reached the age of 65, when she would have been entitled to such a pension at age 60 had she been held to be a woman as a matter of national law.

In Case C-17/05 B.F. Cadman v Health and Safety Executive,[2006] ECR I-9583, possibly one of its most significant discrimination rulings in recent years, the Court of Justice has effectively preserved the capacity of employers to differentiate pay between workers at the same grade, based on a length-of-service criterion. The claimant in the main proceedings, Bernadette Cadman, discovered in 2001 that the annual salaries of four men also employed as inspectors at the same grade as her were up to £13,000 higher. The claimant had worked for the Health and Safety Executive for nine years, whereas her male colleagues had been employed for a longer period.

The Employment Tribunal found in the claimant’s favour, and held that her salary should be modified to equal that of others working at the same grade, in accordance with s1 of the Equal Pay Act 1970. The Employment Appeal Tribunal (EAT) reversed that decision, citing Case 109/88 Danfoss [1989] ECR 3199 as authority for the proposition that where unequal pay arises among full-time workers when length of service is used as a criterion, no special justification is required. The EAT considered that Danfoss remained good authority for full-time employees, while Mrs Cadman’s claim related to part-time employment. After the case had been referred to the Court of Justice the Court was uncertain whether the approach in Danfoss remained appropriate, in the light of subsequent Court rulings (for example, Case C-184/89 Nimz [1991] ECR 1297) that have arguably evidenced ‘second thoughts’ on the question.

The Court of Appeal’s first two questions concerned whether and in what circumstances Article 141 EC (now Article 157 TFEU) requires an employer to provide justification for recourse to the criterion of length of service as a determinant of pay where the use of that criterion gives rise to disparities between the men and women included in that comparison. In response, the Court of Justice recalled the general rule outlined in Danfoss, where the Court had confirmed that rewarding the experience that enables workers to better perform their duties is a legitimate objective of pay policy, and that recourse to the length-of-service criterion is generally appropriate to attain that objective. Employers are not obliged to establish specifically that recourse to this criterion is appropriate to attain that objective as regards a particular job, unless an employee provides evidence giving rise to serious doubts that recourse to the criterion is appropriate. In such circumstances, an employer would be obliged to prove that experience enables the worker to perform their duties better in that particular job. The Court recommended further that where a job classification system based on an evaluation of work to be carried out is used in determining pay levels, it is unnecessary to show that a particular worker has gained experience during the relevant period which has enabled him to perform his duties better.

The effect of the judgment may be that women who change jobs during their career, or, for whatever reason, take career breaks while not covered by an employment contract, could see their pay affected where they begin working in a post for which the experience gained through length of service is genuinely linked to greater skill in the job. In those circumstances, employers can legitimately differentiate between employees doing the same job, but who have been employed for varying lengths of time. On the other hand, contracted employees who opt for maternity leave without terminating their employment contracts should not be affected. Nuances aside, in a society where the job-for-life culture is increasingly rare, it is inevitable that any ruling preserving a right for employers to raise salaries incrementally on a performance-related length of service basis could impact on millions throughout the EU. Individuals who disagree with a ‘length of service’ pay scheme on the basis that greater experience is not linked to job performance can challenge the scheme on a case-by-case basis. The onus will then be on employers to prove the direct relationship between past experience and job performance, in order to ‘reasonably’ justify using length of service as a factor in setting differential pay for workers.


Application of national time limits to claims under Article 157 TFEU

In Case C-208/90 Emmott v Minister for Social Welfare [1991] ECR I-4269, the Court of Justice stated that a Member State in breach of its obligations under a Directive may not rely on an individual’s delay in initiating proceedings in order to defend a claim based on rights conferred upon him by a Directive. Thus, national time limits could only start to apply after implementation of the Directive into national law. However, this ruling was qualified in Case C-338/91 Steenhorst-Neerings v Bestuur van de Bedrijfsvereniging voor Detailhandel, Ambachten en Huisvrouwen [1993] ECR I-5475 where there was a limitation of the retroactive effect of claiming disability benefit to 12 months. The Court drew a distinction between this rule and the time limit ruling in Emmott. This rule served simply to ensure sound administration. In Case C-188/95 Fantask A/S v Industrieministeriet Erhvervsministeriet) [1997] ECR I-6783 the Court confirmed that Emmott was justified by the special circumstances of the case, where the time limit meant that the applicant was deprived of any opportunity to rely on her right to equal treatment under a Directive, but that Union law did not prevent a Member State, which has not properly transposed a Directive, from relying on a national limitation period which was not less favourable than a Union one and made the exercise of EU law neither virtually impossible nor excessively difficult. Further confirmation came in Case C-78/98 Preston v Wolverhampton Healthcare NHS Trust and Others and Fletcher v Midland Bank plc [1999] ECR I-3201 where the Court of Justice stated that a six-month period within which a claim for membership of an occupational pension scheme may be brought was justified in the interests of legal certainty.

Summary Article 157 TFEU (ex Article 141 EC) contains the requirement of equal pay for men and women. Having established that Article 157 TFEU did indeed have direct effect both horizontally and vertically, the Court of Justice has interpreted the Article to expand its scope of application greatly.

It extended the meaning of ‘pay’ to include a wide range of benefits as long as there was ‘consideration… that the worker receives… albeit indirectly, in respect of his employment from his employer’. It also extended the scope of the Article to include indirect discrimination, in particular discrimination against part-time workers who are predominantly women, subject to the possibility of objective justification. However, once a prima facie case of indirect discrimination has been established, the burden of proof to establish that this is not discrimination based on sex falls on the employer.

Activity 14.1 a. How can direct discrimination be justified?

b. Give a definition of indirect discrimination.

c. What factors suggest that there is a prima facie case of indirect discrimination?

d. Give two examples from the case law of indirect discrimination.

e. When a prima facie case of indirect discrimination is established, who bears the burden of proof for determination of the outcome of the case?

f. What law (case law and or secondary legislation) gives the burden of proof in a situation where the pay scheme is not transparent but results in women being paid less than men?

g. On whom does it lie?

h. What are the criteria for justifying indirect discrimination?

i. ‘Equal pay for work of equal value’ is now included in the wording of Article 157 TFEU (ex Article 141 EC). Give an example of two sets of worker, which have been compared.


14.2 Equal treatment

Essential reading Horspool and Humphreys, Chapter 16: ‘Discrimination law: from sex

discrimination in employment to a general equality principle’, sections 16.28–16.52, pp.577–589.

Craig and de Búrca, Chapter 24: ‘Equal treatment of women and men’, pp.908–948.

14.2.1 Equal treatment Directives Several Directives provide for equal treatment of men and women.

Directive 76/207 (employment) (replaced by Directive 2006/54).

Directive 79/7 (social security).

Directive 86/378 (occupational social security) (replaced by Directive 2006/54).

Directive 86/614 (self-employment).

Directive 92/85 (pregnant women and working mothers). Prohibits dismissal of women from the beginning of their pregnancy to the end of maternity leave.

Directive 96/34 (parental leave).

Directive 96/97 (equal treatment occupational social security schemes) (replaced by Directive 2006/54).

The Equal Treatment Directive (ETD): Directive 76/207 (replaced by Directive 2006/54).

Recall that the case that establishes that there is no horizontal direct effect of an unimplemented Directive concerned the direct effect of the ETD: Case 152/84 Marshall v Southampton & Southwest Hampshire Area Health Authority [1986] ECR 723.

The Equal Treatment Directive: Directive 76/207 (now included in Directive 2006/54)

Amendment of the ETD by Directive 2006/54 (itself replacing Directive 2002/73) has included the following definitions in Article 2 of the Directive.

Direct discrimination

Where one person is treated less favourably on grounds of sex than another is, has been or would be in a comparable situation.

Indirect discrimination

Where an apparently neutral provision, criterion or practice would put persons of one sex at a particular disadvantage compared with persons of the other sex, unless that provision, criterion or practice is objectively justified by a legitimate aim, and the means of achieving that aim are appropriate and necessary.

Sexual harassment

Where any form of unwanted verbal, non-verbal or physical conduct of a sexual nature occurs with the purpose or effect of violating the dignity of a person, in particular when creating an intimidating, hostile, degrading, humiliating or offensive environment.

The Directive also amends the ETD so as to:

give safeguards to women taking leave of work for maternity leave – to the effect that they will be able to return to their job ‘on terms and conditions which are no less favourable to her and to benefit from any improvement in working conditions to which she would have been entitled in her absence’ (Article 15)


make clear that less favourable treatment of a woman related to pregnancy or maternity leave will constitute discrimination

legislate the principle laid down in Coote (below): that judicial and/or administrative procedures should be available for all persons who considered themselves to be wronged by the failure to apply the principle of equal treatment to them, even after the relationship in which the discrimination is alleged to have occurred has ended (Article 17(1))

lay down a requirement that Member States should introduce such measures as are necessary to ensure real and effective compensation, including removing any upper limit on compensation and reparation (Article 18).

We have seen that Article 157 TFEU (ex Article 141 EC) requires equality of pay for men and women, but it does not require ‘equal treatment’. This falls under the Equal Treatment Directive, which is a powerful weapon to ensure the abolition of sex discrimination in the Union. It seeks to ensure equality of treatment in relation to access to employment, recruitment, promotion and conditions relating to dismissal.

The Court‘s case law in this area has elevated equality between the sexes into the basis of a general principle of equality in Union law (see below).

Recall the case law discussed in the Constitutional sections of the course where provisions of the ETD have been at issue:

Case C-271/91 Marshall v Southampton and South West Area Health Authority (no2) [1993] ECR I-4367(Chapter 6)

Case 14/83 von Colson v Land Nordrhein-Westfalen [1984] ECR I-4541 (Chapter 6)

Case 222/84 Johnston v Chief Constable of the Royal Ulster Constabulary [1986] ECR 1651 (Chapter 7).

14.2.2 Derogations The Equal Treatment Directive – Directive 76/207 – (now included in Directive 2006/54) provides for a number of derogations:

In respect of activities for which the sex of the worker constitutes a determining factor Article 14(2) Directive 2006/54 sets out the derogation as follows:

Member States may provide, as regards access to employment including the training leading thereto, that a difference of treatment which based on a characteristic related to sex shall not constitute discrimination where, by reason of the nature or the context in which they are carried out, such a characteristic constitutes a genuine and determining occupational requirement, provided that its objective is legitimate and the requirement is proportionate.

Case C-345/89 The Republic (France) v Stoeckel [1991] ECR 4047

Labour law in France, which included a general ban on night-working for women, apparently to protect them, was not lawful under the exception.

Case 165/82 Commission v United Kingdom (male midwives) [1983] ECR 3431

In the UK there was legislation which restricted the profession of midwife to women; it was held by the Court of Justice to fall within Article 2.2 ETD (now Article 14(2) Directive 2006/54), because of the ‘personal sensitivities’ involved.

Case 222/84 Johnston v Chief Constable of the Royal Ulster Constabulary [1986] ECR 1651

The RUC (Royal Ulster Constabulary) decided not to employ women as full-time members of the RUC Reserve as women were not equipped with or trained to bear firearms. Johnston had been an unarmed member of the RUC for three years and she challenged the refusal to renew her contract. The RUC claimed that the refusal to issue firearms to women was to prevent them from being targets of assassination and was

Go to your study pack and read the extract from Case 222/84 Marguerite Johnston v Chief Constable of the Royal Ulster Constabulary.


justified under the Article 2(2) exception in the ETD (now Article 14(2)). The Court of Justice accepted that such a role could fall under Article 2(2) but stated that although Member States could take account of the special circumstances of women in certain areas, it must do so in a proportionate manner. This would include a consideration of whether, rather than refusing to renew her contract, Ms Johnston could not have been deployed in areas which did not require the bearing of firearms. The proportionality of this was to be determined by the national court.

Case C-273/97 Sirdar v The Army Board, Secretary of State for Defence [1999] ECR I-7403; [1999] All ER (EC) 928, [1999] 3 CMLR 559.

The Court of Justice held that women may be excluded from service in special combat units such as the Royal Marines under the provisions of Article 2(2) of Directive 76/207 because of the nature of the activities in question and the context in which they are carried out. Angela Sirdar was a chef in the British army. She was informed that she was to be made redundant but then received an offer of transfer to the Royal Marines. However this offer was made under the mistaken impression that she was a man. She was later informed that she was ineligible because of a policy of excluding women from that regiment.

The Court found that ‘the organisation of the Royal Marines differs fundamentally from that of other units in the British armed forces, of which they are “the point of the arrow head”. They are a small force and are intended to be the first line of attack. Within this regiment the chefs are also required to serve as front line commandos.’ It was therefore justified for the composition of the Royal Marines to remain ‘exclusively male’.

In Case C-285/98 Kreil v Germany [2000] ECR I-69, the Court held that Article 2(2) of the ETD did not justify the application of national provisions which imposed a general exclusion on women from military posts involving the use of firearms and which allowed them access only to medical and military-music services.

Article 2(3): ‘provisions concerning the protection of women, particularly as regards pregnancy and maternity’ (Article 2(2(c)) Directive 2006/54)

Note that dismissal for pregnancy is direct discrimination as is the refusal to employ a woman because she is pregnant: Case C-177/88 Dekker [1990] ECR I-3841.

However, in Case 179/88 Hertz [1990] ECR I-3979 it was held that it was lawful to dismiss a woman for illness following pregnancy. See also Case C-400/95 Larsson [1997] ECR I-2757 where it was held that dismissal following repeated illness after maternity leave is not discrimination.

Note that Directive 92/85 (pregnant women and working mothers) prohibits dismissal of women from the beginning of their pregnancy to the end of maternity leave but does not cover the situation in Dekker where a woman is not appointed because she is pregnant. So Dekker and Article 2(3) of the ETD are still relevant here. See: Case C-207/98 Mahlburg v Land Mecklenburg-Vorpommern [2000] ECR I-549. In the following cases, the dismissal was found to be unlawful under Article 2(3) of the Equal Treatment Directive. See: Case C-32/93 Webb v EMO Air Cargo [1994] ECR I-3567. A woman who was employed on an indefinite contract to cover the absence from work of another woman on maternity leave, was dismissed when she herself became pregnant. This was held to be unlawful under the Equal Treatment Directive.

Originally it appeared that a woman who had been employed on a short-term contract, would not be protected if dismissed for pregnancy. However, it has now been confirmed that a woman employed on a short-term contract is also protected from dismissal because she is pregnant: Case C-109/00 Tele Danmark v HK [2001] ECR I-6993.

A woman is not required to inform a prospective employer that she is pregnant at the time of her job interview: Case C-320/01 Busch v Klinikum Neustadt GmbH [2003] ECR I-2041

Go to your study pack and read the extract from Case C-177/88 Elisabeth Johanna Pacifica Dekker v Stichting Vormingscentrum voor Jong Volwassenen (VJV-Centrum) Plus.

Go to your study pack and read the extract from Case C-32/93 Carole Louise Webb v EMO Air Cargo (UK) Ltd.


Article 2(4): permits measures which ‘promote equal opportunity for men and women, in particular by removing existing inequalities which affect women’s opportunities’. This is another exception to the principle of equal treatment allowing positive action. This was restrictively interpreted in Case C-450/93 Kalanke [1995] ECR I-3051 which caused a great deal of criticism.

A wider approach was adopted, however, after the addition of paragraph 4 to Article 141 EC [Article 119] (now Article 157(4) TFEU) by the Amsterdam Treaty. The new paragraph reads:

With a view to ensuring full equality in practice between men and women in working life, the principles of equal treatment shall not prevent any Member State from maintaining or adopting measures providing for specific advantages in order to make it easier for the under-represented sex to pursue a vocational activity or to prevent or compensate for disadvantages in professional careers.

In Case C-409/95 Marschall v Land Nordrhein Westfalen [1997] ECR I-6363, [1997] All ER (EC) 865, decided after this amendment to the Treaty article, female candidates for promotion who were equally qualified to their male colleagues were to be given preferential treatment in sectors where women were underrepresented. The Court distinguished the procedure under review in this case from that at issue in Kalanke because it contained a ‘saving clause‘ which permitted the appointment of a man on the basis of his particular, individual characteristics. In Kalanke, in the absence of such a clause, the appointment of a woman was automatic.

But see Case C-407/98 Abrahamsson and Anderson v Fogelqvist [2000] ECR I-5539. The case concerned Swedish legislation which stated that ‘a candidate belonging to an under-represented sex who possesses sufficient qualifications must be granted preference over a candidate of the opposite sex who would otherwise have been chosen’. There was a proviso that ‘positive discrimination must… not be applied where the difference between the candidates’ qualifications is so great that such application would give rise to a breach of the requirement of objectivity in the making of appointments’ but the Court held that this was unclear as to scope and application. The result was that a candidate from the underrepresented sex who simply had sufficient qualifications would be appointed even if their merits were clearly inferior to a candidate of the opposite sex. The Swedish law applied to the appointment of University professors and as a result a woman (Ms Fogelqvist) had been appointed professor rather than a Mr Anderson, despite her being considerably less well qualified. The Court of Justice held that this was not lawful. Although Article 141(4) EC (now Article 157(4) TFEU) allowed Member States to practise positive discrimination, the selection method in this legislation was ‘on any view… disproportionate to the aim pursued’ (paragraph 55).

The legislation was therefore not lawful under the positive discrimination exception to Article 141 EC (now Article 157 TFEU) (or under Articles 2(1) and 2(4) of Directive 76/207, now Article 3 Directive 2006/54).

Other provisions of Directive 76/207 included in Directive 2006/54

For Article 17 Directive 2006/54 (Directive 76/207, Article 6 (effective judicial protection)) see Case C-195/97 Coote v Granada Hospitality [1998] ECR I-5199. Ms Coote was employed by Granada Hospitality and brought a case for sex discrimination against them, alleging that she had been dismissed because of her pregnancy. The claim was settled and she then left the company’s employment by mutual agreement.

When she later sought a reference from Granada, they failed to supply her with one and she alleged that this was a reaction to the discrimination claim she had brought against them. As a consequence of the failure to supply a reference she was unable to secure employment.

The Sex Discrimination Act did not appear to cover the situation where the act of discrimination is against a former employee.

Go to your study pack and read the extract from Case C-450/93 Eckhard Kalanke v Freie Hansestadt Bremen.


The Court of Justice held that Article 6 of Directive 76/207 required Member States to introduce into their legal systems such measures as were necessary to ensure judicial protection of workers whose employers refuse to give a reference as a reaction to legal proceedings taken to enforce equal treatment as required by the Directive. See account of Case 14/83 von Colson v Land Nordrhein-Westfalen [1984] ECR I-4541 in Chapter 6.

Summary A number of Directives provide for equal treatment of men and women. By far the most important of these is the Equal Treatment Directive, Directive 76/207 (replaced by Directive 2006/54) which guarantees equality of treatment for men and women ‘as regards access to employment, including promotion, and to vocational training (and promotion added by Directive 2006/54) and as regards working conditions’ (Article 1 of the Directive).

Unlike the equal pay requirement of Article 157 TFEU to which there are no exceptions (although indirect discrimination under this Article may be objectively justified), there are exceptions to the principle of equal treatment which have been interpreted by the Court of Justice. The Court has held that dismissal on the grounds of pregnancy is direct discrimination under the Directive.

Activity 14.2 a. Summarise when a woman would rely on Article 157 TFEU and when she would

rely on the Equal Treatment Articles in Directive 2006/54 (Chapter 3, Article 14–16).

b. List the exceptions contained in Directive 2006/54.

c. Give two examples of the use of Article 2.2 of the Equal Treatment Directive to reserve professions to one sex.

d. In Webb v EMO, the Court of Justice was asked to decide whether the position of a woman who is incapable of performing the task which she has been recruited to deal with because of her pregnancy, is comparable to a man similarly incapable or medical or other reasons. What did the Court decide?

e. In the case of Hertz, Ms Hertz suffered an illness related to pregnancy but which manifested itself after maternity leave. Was she protected by the Directive 2006/54?

f. Is discrimination on the grounds of pregnancy direct or indirect discrimination?

g. Ms Dekker was not recruited because she was pregnant. Is this covered by (i) Directive 2006/54 or (ii) the Pregnancy Directive?

Activity 14.3 In Case 167/97 Seymour-Smith and Perez [1999] ECR I-623 Mrs Seymour-Smith and Mrs Perez were dismissed when they had been employed for less than two years. Their claims for unfair dismissal were refused by the industrial tribunal on the grounds that their employment had lasted less than two years and their claims were therefore excluded by the terms of the Unfair Dismissal (Variation of Qualifying Period) Order. This Order deprived employees dismissed before they had completed two years’ continuous employment for the same employer of the right not to be unfairly dismissed.

The two women sought judicial review of the Order claiming that it was in contravention of Article 141 of the EC Treaty (now Article 157 TFEU) and Directive 76/207 (the Equal Treatment Directive) because a considerably smaller percentage of women than men is able to satisfy the condition of two years’ employment required and that therefore the terms of the Order indirectly discriminates against women.

A reference was made to the Court of Justice under Article 234 EC (now Article 267 TFEU).

Remedies: On national limits to compensation and interest, see: Case C-271/91 Marshall v Southampton and South West Area Health Authority [Marshall No.2) [1992] ECR I-4367.


In this case, consider whether the following were held to fall under Article 141 EC (now Article 157 TFEU) or the Equal Treatment Directive, now Directive 2006/54.

a. An award of compensation for breach of the right not to be unfairly dismissed.

b. The conditions determining whether an employee is entitled to obtain compensation when he/she has been unfairly dismissed.

c. The conditions determining whether an employee who has been unfairly dismissed is entitled to obtain reinstatement or re-engagement.

14.3 The general principle of non-discrimination

Essential reading Horspool and Humphreys, Chapter 6: ‘General principles of law‘, 6.43–6.47,

pp.150; Chapter 16: ‘Discrimination law: from sex discrimination in employment to a general equality principle’, sections 16.74–16.80, pp.598–602.

This chapter has covered the law – both legislation and case law – expanding the scope of the original commitment to ‘equal pay for equal work’. Notice that the principle of non-discrimination is the foundation of European Union law. The basis of the general principle is the principle that there should be no discrimination on the grounds of nationality ‘within the scope of this Treaty’, that is between Member States, which is enshrined in Article 18 TFEU and manifested in the Articles underpinning the four freedoms. It is also apparent in Article 157 TFEU.

It is considered that the case law of the Court of Justice has elevated the principle of non-discrimination or equality (they are considered to be the same principle) to one of the general principles of Union law.

We shall conclude with cases which illustrate this approach of the Court and which are an important part of this area.

14.3.1 Elimination of sex discrimination as a fundamental human right A high point in this case law was when the Court explicitly recognised that the elimination of sex discrimination was a fundamental human right upheld by Union law. See: Case C-13/94 P v S and Cornwall County Council [1996] ECR I-2143.

The case concerned a transsexual who was threatened with dismissal if she proceeded with gender reassignment, and the Court upheld her claim that this was unlawful discrimination based on the Equal Treatment Directive.

The Court stated that equal treatment of men and women in employment was ‘simply the expression, in the relevant field, of the principle of equality, which is one of the fundamental principles of Union law’.

In a later case, however, the Court retreated somewhat and failed to uphold the claim that a travel concession offered to unmarried partners should also be offered to same-sex partners. The Court refused to extend the protection offered by EU law against sex discrimination to cover discrimination on the grounds of sexual orientation. See: Case C-249/96 Grant v South-West Trains [1998] ECR I-621; [1998] All ER (EC) 193.

The Court considered that it did not have jurisdiction to extend the equal treatment principle to cases concerning discrimination on the grounds of sexual orientation, as it was a matter on which different Member States took different approaches. Sexual orientation could not be equated with sex discrimination. The EU was about to take legislative action in this area on the basis of the new Article 13 EC (now Article 19 TFEU) in the Treaty of Amsterdam.

See also Case C-122/99 D v Council [2001] ECR I-4319, where a Swedish employee of the Council was in a same-sex relationship which was recognised as a registered partnership in Sweden. D wanted to claim an EU staff household allowance which is granted to employees who are married. The Court of Justice rejected arguments based

When answering a question on the principle of non-discrimination, it is important to refer to Article 18 TFEU (ex Article 12 EC) and the four freedoms as well as the principle of equal treatment of men and women.


on equal treatment, discrimination on the grounds of sex and respect for family life as guaranteed by Article 8 of the ECHR. The Court stated it could not disregard the views prevailing within the Union as a whole, where same-sex partnerships were not considered equivalent to marriage.

Article 19 TFEU

An explicit legal basis for legislation now exists to combat this and other forms of discrimination. The Treaty of Amsterdam added Article 13 EC (now Article 19 TFEU) to the Treaty of Rome, which provides a legal basis for the Union to take action to: ‘combat discrimination based on sex, racial or ethnic origin, religion or belief, disability, age or sexual orientation’.

The inclusion of this Article was clearly an important step in the constitutionalising of the Treaties, and Directives have already been legislated using this as a legal base. It should be noted that Article 19 TFEU is a weaker legal base than Article 18 TFEU. Article 18 TFEU has been held to be directly effective by the Court of Justice and contains a clear prohibition. Article 19 TFEU is an ‘enabling’ article: the Council ‘may take appropriate action’. In other words, the Article will only benefit individuals if Member States agree unanimously to adopt Directives under the Article. This is perhaps why legislation has been forthcoming so swiftly under this Article.

14.3.2 Anti-discrimination Directives Directive 2000/78 prohibits discrimination on the grounds of religion or belief, disability, age or sexual orientation, in regard to access to employment or occupation, with the aim of ‘putting into effect in the Member States the principle of equal treatment’ (Article 1). It covers both direct and indirect discrimination (Article 2).

It concerns the following areas:

conditions of access to employed or self-employed activities

vocational training

employment and working conditions

membership of, and involvement of, any other organisation whose members carry on a particular profession (Article 3).

It does permit differential treatment ‘providing that the objective is legitimate and the requirement if proportionate (Article 4), specifically so in regard to different treatment on the grounds of age’ (Article 6).

The Directive allows for positive discrimination (Article 7) and requires that the Member States introduce procedures to provide remedies and enforcement (Article 9).

It does not cover sex discrimination, which has been addressed by Directive 76/207, or racial discrimination, which is covered by Directive 2000/43.

Directive 2000/43 Racial and ethnic origin

Directive 2000/43 implements the principle of equal treatment on the grounds of racial and ethnic origin.

The objective is:

to contribute towards combating racism, xenophobia and anti-Semitism by ensuring that fundamental rights are respected as general principles of Union law (Article 6(2) TEU), and to support the implementation of integration policies in the fields of employment and social affairs.

The Directive prohibits both direct and indirect discrimination (Article 2). Its scope is laid down in Article 3; Article 5 permits positive discrimination and Articles 9 and 15 set out that Member States must ensure proper procedures and sanctions where there are breaches.

It should be noted that Directive 2000/78 is limited to economic actors, whereas Directive 2000/43 has no such limitation.


An important case to come before the Court of Justice concerning Directive 2000/78 was Case C-144/04 Werner Mangold v Rüdiger Helm [2005] ECR I-7181. The case was concerned with age discrimination. It concerned a German law on fixed-term contracts, which, over the age of 52, could be concluded without any restrictions, that is, an employee above that age could have his contract terminated without compensation. The date of implementation of the Directive on which this legislation was based (Council Directive 1999/70/EC of 28 June concerning the framework agreement on fixed-term work) had not yet expired and Article 6 of Council Directive 2000/78/EC had not yet come into force. The age limit in the original German Act (based on Article 6), had been set at 58, but had been lowered on 1 January 2003 to 52. Mr Mangold, while aged 56, had concluded a fixed-term contract with Mr Helm, to take effect on 1 July 2003 until February 2004. Mr Mangold contended that the fixed term of the contract was forced upon him because the German law made it ‘easier to conclude fixed-term contracts of employment with older workers… since the employee is more than 52 years old’.

The Court answered the questions referred to it, in stating clearly the effect of the general principle of equality. While it accepted that the Framework Directive on Fixed-Term Work allowed domestic legislation to lower the age above which fixed-term contracts may be concluded without restrictions if it was ‘for reasons connected with the need to encourage employment’, it concluded that any provisions of national law that conflicted with its broad understanding of the effect of age discrimination legislation should be set aside. The Court said:

The principle of non-discrimination on grounds of age must thus be regarded as a general principle of Community law. Where national rules fall within the scope of Community law…and reference is made to the Court for a preliminary ruling, the Court must provide all the criteria of interpretation needed by the national court to determine whether those rules are compatible with such a principle. (paragraph 75 of the judgment).

Thus, the full effectiveness of Union law in the form of a general principle had to be guaranteed by the national court in setting aside any provision of national law in conflict with Union law ‘even where the period prescribed for transposition of that directive had not yet expired’. This case, where the Court affirms that the principle of non-discrimination on grounds of age is a general principle of Union law, is a clear indication that any form of discrimination within the competence of the Union will be measured against the same yardstick.

The Amsterdam Treaty also saw the addition of equality between men and women as one of the objectives of the Treaty in Article 2 EC (now Article 2 TFEU) and added Article 3 EC (now Article 8 TFEU), which reads ‘the [Union] shall aim to eliminate inequalities, and to promote equality, between men and women’.

A more recent case concerning age discrimination was Case C-555/07 Seda Kücükdeveci. Ms Kücükdeveci was employed from the age of 18 by a private German company called Swedex. Ten years after she started working for them she was dismissed, and given the notice period of someone who had been working for the company for only three years. The reason for this was German legislation which stated that periods of employment prior to the age of 25 should not be taken into account when calculating length of employment. Ms Kücükdeveci challenged this decision before the German courts, which referred to the Court of Justice the question of whether the law constituted illegal age discrimination according to EU primary law and Directive 2000/78. The German court also referred the question of whether, if the first question was answered in the affirmative, the national court should disapply the national law in the dispute between two private individuals. The Court reiterated its stance in Mangold that it is a general principle of Union law that all discrimination on grounds of age is prohibited, and that Directive 2000/78 ‘gives specific expression’ to that principle. The German government claimed that young workers can generally react more easily and more rapidly to the loss of their jobs and therefore greater flexibility can be demanded of them. Further, shorter notice periods for younger workers facilitate their recruitment by increasing the flexibility of personnel management. The Court took these justifications to be offered within the meaning of Article 6(1) of Directive 2000/78

Go to your study pack and read the extract from Case C-144/04 Werner Mangold v Rüdiger Helm.


and thus went on to question whether the means of achieving such a legitimate aim were ‘appropriate and necessary’. The Court found that the measures were neither appropriate nor necessary because they applied to all employees who joined the undertaking before the age of 25. Further, the legislation affected disproportionately those joining vocational work with few qualifications, as opposed to those who chose to study for longer and entered the workforce at a later stage. The Court also proposed the horizontal direct effect of the Directive.

Activity 14.4 Consider how through case law the Court of Justice has elevated equality to a general principle of Union law. Refer to cases discussed in other chapters, in particular Chapter 5.


Self-assessment questions 1. What kind of discrimination was at issue in P v S and Cornwall County Council?

2. What kind of discrimination was at issue in Grant v South West Trains?

3. Does Mangold v Helm and Kücükdeveci constitute an advance in relation to the previous two cases?

4. Article 19 TFEU provides a legal basis for challenging what kind of discrimination?

5. Name the case that established direct effect of Article 157 TFEU (ex Article 141 EC).

6. Was Ms Defrenne’s action against an ‘emanation of the state’ or a private body?

7. Was the Treaty Article vertically or horizontally directly effective?

8. What is the difference in effectiveness between Articles 18 and 19 TFEU?

9. Why was it necessary to limit the retrospective effect of the judgment and how was this done?

10. Cite three cases illustrating the Court’s expansive interpretation of the meaning of pay.

Useful further reading Douglas-Scott, S. ‘A tale of two courts: Luxembourg, Strasbourg and the growing

European human rights acquis’, CMLRev 43 2006, pp.629–665.

Fredman, S. ‘Transformation or dilution: fundamental rights in the EU social space’, European Law Journal 12(1) 2006, pp.41–60.

Curtin, D. ’Scalping the community legislator: occupational pensions and Barber’, CMLRev 27 1990, pp.475–506.

Costello, C. and Davies, G. ‘The case law of the European Court of Justice in the field of sex equality since 2000’, CMLRev 43 2006, pp.1567–1616.

Sample examination questions Question 1 The elimination of sex discrimination has become a major objective of the European Union. Discuss its development through legislation from the Treaty of Rome and through the case law of the European Court of Justice.

Question 2 ‘Non-discrimination has been developed into a general principle of Union law.’ Describe its development focusing on the role of the Court of Justice.


Advice on answering the questions Question 1 This question requires the following.

A statement that the requirement for equal pay for men and women was in the original Treaty in 1957.

A mention of Defrenne v Sabena (No 2) which confirmed that the Article was horizontally directly effective and stated that the Article had a social as well as an economic purpose.

A discussion of the case law which has expanded the scope of Article 141 EC in regard to the meaning of ‘pay’ and to cover indirect discrimination.

A discussion of secondary legislation focusing on the Equal Treatment Directive and Directive 2006/54 and explaining how the enactment of this Directive changed the Community rules into a system to challenge sex discrimination, rather than simply a set of rules concerned with equal pay. You could mention the cases on pregnancy.

An explanation of the fact that Directive 2006/54 and the ETD contain exceptions.

Mention should be made of the amendment of Article 141 EC by ToA to include ‘work of equal value‘.

A conclusion that elimination of sex discrimination is a major objective of the EU and that, from the case law on this, a general principle of non-discrimination has been developed.

Question 2 This question, as noted in Chapter 4, requires a discussion of the following.

The principle of non-discrimination which underpins the Treaty as a whole (Article 18 TFEU) and which manifests itself in the free movement of goods, services and persons.

Those Treaty Articles which prohibit discrimination: Article 40 (2) TFEU (ex Article 34(2) EC (no discrimination between producers or consumers within the Union – mention briefly only), Article 157 TFEU (ex Article 141 EC) (equal pay for equal work) and the new Article 13 EC.

The case law in which the ECJ has interpreted Article 141 EC and the Equal Treatment Directive (Directive 76/207) in a very expansive manner.

An account should be given of the ECJ’s case law interpreting the meaning of ‘pay’ under Article 157 TFEU and the extension of the Article to cover indirect discrimination. Mention one or two cases on each. State that the ETD has also been interpreted expansively, citing P v S and Cornwall County Council in particular (with limits reached in Grant), then consider Mangold v Helm and Kücükdeveci and explain that this may mean that the ECJ has developed a general principle of non-discrimination or equality. You could then also cite Case 103 and 145/77 Royal Scholten Honig v Intervention Board [1978] (Chapter 5).

Although the question refers to case law, in a question on non-discrimination Article 19 TFEU and the two Directives, 2000/78 and 2000/43, should be mentioned. They are evidence of the commitment of the EU to the principle of non-discrimination.


Reflect and review


Are you ready to start revising this guide?

Ready to move on = I am satisfied that I have sufficient understanding of the principles outlined in this chapter to enable me to go on to revise the whole subject.

Need to revise first = There are one or two areas in this chapter I am unsure about and need to revise before I go on to wider revision.



Ready to move on


Need to study again

I can give an account of the case law of the Court of Justice that has expanded the meaning of pay.

I can explain the difference between the treatment of access to the state pension and to occupational pensions under Article 157 TFEU.

I can name the case that established direct effect of Article 157 TFEU (ex Article 141 EC) and explain why it was necessary to limit the retrospective effect of that judgment.

I can explain ‘indirect’ discrimination.

I can explain what is meant by ‘objective justification’ in regard to apparent sex discrimination.

I can explain what is meant by ‘work of equal value’ with reference to case law.

I can give examples of what is covered by the requirement for ‘equal treatment’ in Articles 14–16 Directive 2006/54 (formerly the Equal Treatment Directives (the ETD)).

I can explain how the pregnant woman is protected from failure to be appointed and from dismissal because of pregnancy.

I can explain the significance of Case C–144/04 Werner Mangold v Rüdiger Helm and Case C-555/07 Seda Kücükdeveci in terms of elevating the principle of equality to a general principle.

I can explain how Article 19 TFEU (ex Article 13 EC) extends the principle of non-discrimination.


Must revise

Revision done

14.1 Article 157 TFEU (ex Article 141 EC) – equal pay for equal work

14.2 Equal treatment

14.3 The general principle of non-discrimination


Notes

Feedback to activities

Contents

Using feedback . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 316

Chapter 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 317

Chapter 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 319

Chapter 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 322

Chapter 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 323

Chapter 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 325

Chapter 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 326

Chapter 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 328

Chapter 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 331

Chapter 10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 334

Chapter 11. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 337

Chapter 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 338

Chapter 13. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 340

Chapter 14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 341


Using feedback

Feedback is designed to help you judge how well you have answered the activities in the text. It will show you whether you have understood the question and chosen the correct solutions.

Do not look at the feedback until you have made an attempt at answering the questions. To do so beforehand would be pointless and even counter-productive. Doing the activities helps you learn. Checking the feedback helps you learn more. Remember that ‘doing’ activities teaches you more than reading does.

EU Law Feedback to activities page 317

Chapter 2

Activity 2.1 a. An internal market is characterised by free movement of goods. Goods should be

able to circulate freely within the area without the imposition of customs duties when crossing borders within the common market or encountering any other obstacles to free movement, whether fiscal, physical or technical.

In order to allow free movement of goods imported from third countries, it is also necessary to have a Common Customs Tariff (see below) which sets a common customs duty for every good imported from third countries which is imposed regardless of which country in the common market the good enters.

So, for example, a watch from Russia will pay the same duty whether it enters Italy, France or Germany.

In a common market there is also free movement of persons (workers and establishment), free movement of services and free movement of capital.

The principle underlying a common market is that of non-discrimination (see Article 18 TFEU (ex Article 12 EC)); there should be no discrimination within any country inside the common market against goods, persons or services from any other Member State. (This principle of non-discrimination would not apply to protect goods or persons from third countries.)

There is also a requirement for a competition policy to prevent companies from dividing up the market.

b. The advantages of an internal market for the consumer are:

lower prices

greater choice

greater diversity

technically innovative goods

protection from cartels and monopoly power for the participating countries

greater productivity.

These benefits flow from:

economies of scale from larger markets

increased competition allowing the most efficient and technically innovative companies to prosper.

c. A Common Customs Tariff is the setting of a common customs duty for every good imported into the common market from third countries. The boundary of the common market is the boundary of a single market and goods must pay the same duty wherever (into whichever country) they enter.

d. Without the Common Customs Tariff, there could be no free circulation of goods from third countries, because in the absence of a Common Customs Tariff the imported good would always enter the common market into the country which imposed the lowest duty.

e. The main policies created by the Treaty of Rome were:

the principle of non-discrimination

free movement of goods, persons, services and capital

a Common Customs Tariff

a Competition Policy

a Common Agricultural Policy


a Common Transport Policy

a Common Fisheries Policy

abolition of state aids.

The four institutions were:

the Council of Ministers (later the Council)

the European Assembly (later the European Parliament)

the High Authority

the European Court of Justice.

f. The European Economic Community (EEC) was called the ‘Economic’ Community because its original objective was to establish economic integration between the participating countries in the form of a common market. The policies it established were to further this aim and the institutions it created were aimed at furthering these policies. The aims and objectives of the EEC, which defined and limited the scope within which it had competence to act, were limited to economic ones.

Activity 2.2 The Treaty of Paris 1951 established the first, and most supranational, Community, the European Coal and Steel Community (ESCS). Member States pooled their resources in coal and steel, the materials needed to manufacture weapons. The principal aim was to ensure that no war could ever be waged again between, in particular, France and Germany. The Treaty set up the Institutional framework which was to be followed by the Treaty of Rome in 1957. Unlike the other treaties, the ECSC was concluded for a limited duration of 50 years and expired in 2002. Its remaining relevant provisions were absorbed into the EC Treaty.

Activity 2.3 a. The development of the role of the European Parliament (EP).

Non-legislativeThe 1970 and 1975 Budgetary Treaties increased the Parliament’s role in adopting the budget, giving it the final say over non-compulsory spending.

1979: Direct elections to the EP.

TEU: Competence was given to the EP to set up Committees of Inquiry and an Ombudsman. Citizens were given the right to petition the EP. The Parliament was given the right under Article 192 EC (now Article 225 TFEU) to request the Commission to legislate in a certain area. The appointment of the Commission as a whole was made subject to a vote of approval by the European Parliament.

ToN: EP made a ‘privileged applicant’ for the purposes of judicial review proceedings under Article 263 TFEU. The appointment of the President of the Commission was made subject to a vote of approval by the European Parliament. The maximum number of MEPs was raised to 732 (785 after the accession of Bulgaria and Romania).

LegislativeThe co-operation procedure (now abolished): The SEA (1986) introduced the cooperation procedure which gave the EP a substantially increased role in legislation in those areas where it was used. There were two readings of proposed legislation and, when legislation was turned down for the second time, legislation could only be enacted by a unanimous vote in the Council (in other words, an alliance of the EP and one Member State could veto legislation but this still fell short of a veto by the EP alone).


The assent procedure: The SEA also included the EP as a co-legislator with the Council when the assent procedure is used. This is used for the accession of new Member States and Association Agreements and requires an absolute majority vote of the component members of the EP.

The co-decision procedure: Introduced by the TEU, this procedure makes the EP a co-legislator with the Council; it has a veto over legislation.

Both the ToA and the ToN widened the areas where this procedure is used so that it was already the most generally used legislative procedure.

The Treaty of Lisbon has added more areas for co-decision and makes co-decision ‘the ordinary legislative procedure’ under Article 294 TFEU.

b. The European Economic Community was created by the 1957 Treaty of Rome (the EEC Treaty) and renamed the EC by the Maastricht TEU.

The Maastricht TEU created the European Union (EU) which was the overarching body comprising three pillars. The first pillar included the EC, the ECSC (now expired and absorbed into the EC) and Euratom. The other two pillars were distinct from the EC and were intergovernmental areas of cooperation between the Member States.

All three pillars were governed by the ‘Common Provisions’ of the TEU – Articles 1–7 TEU.

The pillar structure has now been abolished. The ‘Third Pillar’ is now included in Title V of the TFEU, named the Area of freedom, security and justice (Articles 68-89 TFEU).

The ‘Second Pillar’ is now in the TEU, Chapter 2, Title V, Articles 23-46. This part of the TEU is still largely inter-governmental.

c. The essential point is that with qualified majority voting (QMV), the Member States lose their veto and can be bound by legislation which they rejected. It is far harder to obtain a unanimous vote than a vote by QMV partly because where each Member State has a veto, they are under no pressure to compromise.

d. As the number of Member States increases, it becomes far harder to reach unanimity. With a Union of 27 or more Member States, it becomes very difficult.

e. Citizenship was introduced by the Maastricht TEU. All those who are nationals of Member States are citizens of the European Union with all the advantages this entails (see Chapter 12).

Chapter 3

Activity 3.1 No feedback provided.

Activity 3.2a. The SEA added the cooperation procedure (now abolished) which gave the

Parliament two readings of proposed legislation. Where the Parliament vetoed legislation, it could only be enacted by unanimity in the Council, which is hard to achieve. The SEA also introduced the assent procedure which, where it applied, gave the Parliament a veto.

The Maastricht TEU introduced the co-decision procedure which, once it had been simplified by the ToA, made the Parliament effectively a co-legislator with the Council. The scope of competences to which this procedure applies has been increased by each new Treaty. This is now the ‘ordinary legislative procedure’ under Article 294 TFEU.

In this case, the Court of Justice made clear that it was grounds for annulment under Article 230 EC (now Art 263 TFEU) for the Council not to wait to receive the opinion of the Parliament before enacting legislation under the consultation procedure.


b. The role of the Parliament in the legislative procedure has been increased because this is seen to be a way to address the democratic deficit caused by the lack of democratic accountability of the Commission and the Council.

c. The Commission is the powerful executive of the EU yet it is appointed by the Member States rather than elected. Increasing the control of the Parliament over it is seen as a way of subjecting it to control by an elected body.

Activity 3.3a. The Commission is a very unusual body which combines the powers of all three

organs of the state. It acts as the executive of the EU, carrying out its policies and, more importantly, supervising how the executives of the Member State give effect to EU policies. It also acts like an executive and legislator in initiating legislation. It acts as a legislator when it legislates in its own right, as it does when given the power to do so under the Treaties. It is also given wide powers to enact delegated legislation. In regard to infringements of the Competition Articles by undertakings, it acts as both investigator and judge, deciding whether undertakings are in breach and setting penalties.

b. Since the original Treaty of Rome in 1957, the Parliament has had the power to force the resignation of the Commission by a motion of censure carried by a two-thirds majority of those present and a majority of MEPs, under Article 234 TFEU (ex Article 201 EC).

c. In 1999, a vote was taken but not passed by the requisite majority. However, a Committee of Inquiry was set up and when it reported back, its findings were so bad for the Commission that the Commission did resign. It was clear that otherwise a motion of censure might have been passed.

Activity 3.4a. The Council of the EU is the most important institution of the EU; it represents the

interests of the Member States and is the primary legislator for the EU. Originally it was the only legislator and this situation continued until the Parliament was given a role in the adoption of legislation by the introduction of the cooperation procedure in the SEA (see above for further developments). The Council has the power to request the Commission to draw up legislative proposals in some particular area under Article 241 TFEU (ex Article 208 EC) and the Council has made increasing use of this provision. An addition to the Article in the Lisbon TFEU provides that if the Commission does not submit such a proposal it must inform the Council of the reasons for not doing so.

b. Transport ministers from each Member State, authorised to commit the government of that Member State.

c. Until 31 October 2014 the number of votes to constitute a QMV is 255, (see Protocol No 36 on Transitional Provisions for voting weights per country, ex Article 205 EC); where the legislative proposal does not come from the Commission, a two-thirds majority is required. In addition to the qualified majority specified above, a Member State may ask for confirmation that the votes in favour represent at least 62 per cent of the total population of the Union.

Post-2014, a QMV will have three requirements: 55 per cent of the Member States, 65 per cent of the EU population and a blocking minority must comprise Council Representatives of Member States constituting at least 35 per cent of the population of the EU, plus one further Member State. When a proposal is not from the Commission or a High Representative it will require 72 per cent of Member States of Member States, representing 65 per cent of the population.

d. The Presidency rotates among the Member States every six months. The country which occupies the Presidency chairs all meetings of the Council. It has become an increasingly high profile role, with Member States adopting an agenda for their Presidency.


e. The functions of the High Representative (a post added by the Lisbon Treaty (Article 18 TEU) are: to act as a Vice-President of the Commission and to take part in the work of the European Council; to conduct the Union’s Common Foreign and Security Policy and preside over the Foreign Affairs Council. The High Representative ensures consistency of the EU’s external action.

The functions of the President of the European Council are to act as President of the European Council for two and a half years, chairing it and driving forward its work. The President of the European Council should endeavour to facilitate consensus and must report to the European Parliament after each of its meetings. This is a new function, added by the Treaty of Lisbon (see Article 15 (5) TEU), after the European Council had been made into an Institution. Because the provision is very general it can be ‘filled in’ in different ways. The European Council, because of who its members are, is arguably the most important policy making Institution in the EU, even though it has no legislative power.

f. Articles:

Article 43(2) TFEU (ex Article 37(2) EC) Agriculture: Article 294 TFEU (ex Article 251 EC), co-decision (so QMV) and consultation of ECOSOC

Article 114 TFEU (ex Article 95 EC) The internal market: Article 294 TFEU (ex Article 251 EC), co-decision (so QMV) and consultation of ECOSOC

Article 207(2) TFEU (ex Article 133(4) EC) The Common Commercial Policy: Article 294 TFEU (ex Article 251 EC), co-decision to enact regulations

Article 21 TFEU (ex Article 18 EC) Citizenship: Article 294 TFEU (ex Article 251 EC), co-decision

Article 157 TFEU (ex Article 141 EC) Sex equality: Article 294 TFEU (ex Article 251 EC), , consultation of ECOSOC

Article 19(1) TFEU (ex Article 13 EC) Non-discrimination: unanimity, assent procedure Parliament; Article 19(1) TFEU (ex Article 13 EC) ‘incentive measures’, Article 294 TFEU (ex Article 251 EC), co-decision

Article 223(4) TFEU (ex Article 190(4) EC) Procedure for Parliamentary elections: unanimity, assent procedure

Article 91(1) TFEU (ex Article 71(1) EC) Transport: Article 294 TFEU (ex Article 251 EC), EC with consultation of ECOSOC and Committee of the Regions.

g. COREPER is the Committee of Permanent Representatives. It consists of national officials at Ambassador level (COREPER II) or Deputy Ambassador level (COREPER I) who prepare the agenda for Council meetings. Where possible, agreement will be reached by negotiation and discussion in the COREPER meetings prior to the meeting of ministers. Only items that cannot be agreed at this level will be debated at ministerial level. COREPER consults working parties of national experts. It is an important link between national administrations and the EU.

h. When decision-making is by a unanimous vote, every Member State has a veto. There is no incentive for countries to compromise or attempt to reach agreement. Decision-making is very difficult, especially as the number of Member States involved increases. When QMV is introduced, discussions are carried out in the knowledge that any Member State may be overruled. Member States are under pressure to compromise and find solutions, where they can achieve at least some of their objectives. It takes a number (albeit a minority) of Member States to block a legislative measure.

i. The significance of the Luxembourg Accords (1966) was that by perpetuating the requirement for a unanimous vote whenever the legislation was deemed by any one Member State to affect their vital national interest, the Accords resulted in stalemate and paralysis in the Council for nearly 20 years.


The European Community project could not move forward when all important legislation could be vetoed by any one Member State. It was not until the European Single Act (1986), and the introduction of QMV for measures to complete the internal market, that the EC really began to move towards completing the single market.

Activity 3.5No feedback provided.

Activity 3.6 a. The Council is the main legislative body of the EU. The European Council was

originally established outside the framework of the Treaties as a meeting of the heads of state or government, coming together to discuss the future of the Union and outstanding disputes at the very highest level. Its position and composition were formalised by the TEU (Maastricht) in 1993. It has been made one of the EU institutions by the Treaty of Lisbon (Article 13 TEU); this is one of the major changes that the new Treaty has brought about.

b. Composition of the European Council: The European Council is made up of the heads of state or government and the President of the Commission, while the High Representative for Foreign Affairs ‘takes part in its work’.

Role of the European Council: It decides on future initiatives for the institutional and constitutional future of the EU, so it makes decisions on enlargement, it convenes an inter-governmental conference when another Treaty is required, it takes the initiative on matters such as EMU. It is also a forum for resolving disputes between the Member States.

It cannot legislate but must hand down matters which require to be legislated to the Council of the EU to enact.

c. The Luxembourg Accords were a non-legal agreement between Member States that unanimity would be required for legislating matters ‘where important national interests’ were at stake, in contravention of the wording of the Treaty. This resulted in paralysis in the legislature of the EU until the SEA which introduced QMV in Article 114 TFEU (ex Article 95 EC and pre-Amsterdam numbering: Article 100a EC) for measures to complete the internal market. Thenceforth, QMV increasingly became the normal mode of voting. The Luxembourg Accords and the Ioannina Compromise have never been tested in the Court of Justice, but they still have political significance.

d. Where unanimity is required each country has a veto; the method of decision-making is effectively ‘inter-governmental’. Member States do not feel under pressure to compromise as they each have the power of veto. Once QMV is introduced, Member States feel pressure to compromise and reach agreement, as they can be out-voted. They have an incentive to negotiate. The powers of the Commission, as broker, are increased. Decision-making becomes far easier.

e. The Council increasingly makes use of Article 241 TFEU (ex Article 208 EC) to take the legislative initiative, requesting that the Commission draws up legislative proposals. These requests have become increasingly detailed, in contrast to the spirit of the wording of Article 241 TFEU (ex Article 208 EC). The European Council has become the driving force for major constitutional and institutional developments on the Union, taking this power from the Commission.

f. The role of the Court of Auditors is to scrutinise and audit the accounts of the EU.

Chapter 4

Activity 4.1 a. Article 296 TFEU (ex Article 253 EC) facilitates judicial review proceedings because it

requires the legal base to be specified and a rationale for legislation to be set out. These could be helpful to an applicant seeking annulment of the measure under judicial review proceedings by giving grounds for annulment.


b. Subsidiarity means that decisions should be taken at the lowest level, as close to the individual as possible.

In the particular context of EU law, according to Article 5 TEU (ex Article 5 EC), it means that in areas of shared competence (i.e. where both the Member States and the EU have competence to act) decisions should be taken at the Member State rather than the EU level where possible. Decisions should only be taken at the EU level if the objectives of the proposed action cannot be sufficiently achieved by the Member States or where the scale of the proposed action means that the decision cannot be taken at the national level.

An example of the latter might be the environment, where decision-making needs to be applied across the whole EU.

It was added by the TEU as a response to concerns about the tendency of judgments of the Court of Justice and legislation of the EU to tend towards centralisation and further integration.

c. The Protocol asserts this preference because directives leave the choice of forms and methods for legislation to Member States and therefore respects the principle of subsidiarity. Regulations, by contrast, leave absolutely no discretion to the Member States. It is significant that this preference was clearly stated in the Protocol because it means that the Commission must take it into account when drawing up legislation.

d. Unanimity is required in a vote in the Council to change a Commission proposal. This is important because it means that all Member States must agree such an amendment (which is increasingly hard to achieve) and every Member State can exercise a veto over the proposed change.

e. In order to legislate lawfully, the EU must legislate within the competences of the Treaty. Each competence has ‘a legal base’ in the form of the Treaty Article which specifies which voting procedure has been agreed for legislating in the particular area. We have seen that there are significant implications involved in whether qualified majority voting or unanimity is required in the Council and the Parliament’s role will vary significantly according to which legislative procedure is prescribed.

The choice as to which legislative procedure is appropriate for each competence and whether or not Member States have a veto is decided by the Member States acting unanimously when drawing up or amending the Treaties. It is therefore important that when legislating on any particular topic, the correct legal base is used.

f. A Member State may wish to challenge legislation when it believes that the wrong legal base has been used, depriving the Member State of its veto. It may also consider that the European Union has legislated beyond the competence given to it by the Treaty.

g. The Parliament typically challenges legislative acts which have been passed by consultation or by the Council acting alone when the Parliament thinks there is a good argument for the use of a legal base (Treaty Article) which required the co-decision procedure.

h. The decision in the Chernobyl case allowed the Parliament to challenge legislation which it believed was enacted on the wrong legal base, depriving the Parliament of its proper input into the legislative procedure.

Chapter 5

Activity 5.1 a. Fundamental rights protected in the EU legal system have been established by

case law of the Court of Justice. The Court of Justice has drawn inspiration for these rights from the constitutional law of the Member States and international treaties on human rights to which they are signatories, in particular the ECHR. The general principles are founded on principles underlying the Treaties.


b. To list the legally enforceable rights of the EU up to the ratification of the Lisbon Treaty, you would have had to consult the case law of the Court of Justice. Now, the Treaty of Lisbon has given legal effect to the Charter of Fundamental Rights and Freedoms (Article 6(1) TEU).

c. In due course the EU will accede to the European Convention on Human Rights (Article 6(2) TEU), and those rights will also be enforceable directly, not just as part of the EU human rights recognised through the case-law of the Court of Justice. The fundamental rights protected by the EU legal order are not listed in the Treaties but can be found in the case-law of the Court of Justice and now also in the Charter.

d. Ms Hauer wanted to grow vines on her land but was prevented from doing so by an EC Regulation which limited the planting of vines in that region of Germany. On a reference to the Court of Justice, she claimed that her fundamental rights had been infringed and that the Regulation should therefore be annulled.

The Court of Justice agreed that Ms Hauer had the right to property. This was based on the first protocol of the ECHR. Ms Hauer did not succeed in her case. The Court of Justice held that her right to property was outweighed by the Community interest in limiting excess production of wine from that region.

Activity 5.2a. The Charter was given ‘the same legal status’ as the Treaties by the Treaty of Lisbon

(Article 6(1) TEU).

b. Some advantages of a Charter are:

The fact that the rights contained in it have been agreed by representatives of the Member States and the Commission and the Parliament as opposed to only the Court. The situation prior to the coming into force of the Lisbon Treaty was that the fundamental rights included in the EU legal order were selected and applied by the Court of Justice which has jurisdiction over the extent to which they are given effect.

The Charter is a statement of the values of the EU as a whole.

Transparency – it becomes possible to look up and check which rights are, in principle, recognised by the EU.

c. The important thing to note is that in a question like this, in order to answer it fully, an account of the situation before the Charter was given legal force would be required. So a ‘model answer’ would explain what the Charter is but also cover:

the lack of human rights in the original EEC Treaty in 1957

the Court’s initial refusal to acknowledge the existence of any human rights in the Community legal order, citing relevant case law

an account of the Court’s reversal of this position in Stauder v Ulm and subsequent case law

a description of how the Court has incorporated a whole set of fundamental rights into the European Union legal order (with examples)

the scope of application of such rights.

It would then provide a description of the Charter stating that it is now legally binding, giving:

a brief evaluation of whether having the Charter as a legally binding set of rights will improve the protection of fundamental rights in the EU, perhaps mentioning that the Charter makes these rights more visible to the citizens of the European Union, and were drawn up by representatives of the institutions and the Member States. However, it is possible to argue that rights have been adequately protected by the case-law of the Court of Justice.

There is no right answer to this question – just write a conclusion according to your own opinion!


Chapter 6

Activity 6.1The reasoning is based on an analysis of the distinctive nature of Community (now Union) law as compared with other international treaties. The EC Treaty (now the Treaty on the Functioning of the European Union) set up institutions with powers to adopt laws which impose obligations on individuals. Logically, therefore, it must also confer rights on them.

Activity 6.2 Article 267 TFEU (ex Article 234 EC) allows national courts to refer questions to the Court of Justice concerning the interpretation of primary and secondary EU legislation. Directives are a form of secondary legislation. It follows, the Court said, that the Treaty envisages that national courts will be applying Directives. Article 288 TFEU (ex Article 249 EC) says that Directives are ‘binding as to the result to be achieved’. The Court says this provision would be frustrated if Member States’ failure to implement them were to deprive Directives of effect.

The final, and probably most important, argument is a policy one: Directives will be more effective if individuals can enforce them in national courts.

Note that the Directive has always been an important instrument, and is the principal instrument for completing the single market. It was, therefore, very important that the rules contained in Directives were protected and enforced by national courts.

Activity 6.3 In the von Colson case, the Directive had been transposed into German law but because remedies are not harmonised, the Directive could not stipulate what the remedies for breach of the rights protected in the Directive should be. The remedy offered was clearly inadequate for the wrong that Ms von Colson had suffered. However, it complied with the principle of ‘practical possibility’ – it was neither impossible nor virtually impossible for her to receive a remedy and it may well have complied with the principle of ‘equivalence’ – German law may not have had remedies for sex discrimination at all or may have had similarly weak remedies. European Union law rights would have no value if there was no possibility of a proper remedy of some kind. Employers would not worry about breaching them, since the penalties would be so insignificant. Also, since remedies are determined by the national legal system, there are different remedies in different Member States and the individual’s rights to a remedy would be unacceptably different between Member States if some Member States could be allowed to give such a weak remedy. The Court of Justice therefore had to take the European Union law requirements of the national system of remedies one step further and insist on the adequacy, effectiveness and deterrent effect of remedies for European Union law rights.



Activity 6.6 a. Interim relief in the Factortame case meant that the operation of the Act of

Parliament, the Merchant Shipping Act 1988, had to be suspended pending the result of the main case. As you know, it takes two years for the Court of Justice to give a ruling under the Article 267 TFEU (ex Article 234 EC) reference procedure; if the fishing companies were unable to fish during this time, they would go bankrupt. At the least, if their boats were not allowed to go out, the boats would cease to be operational and the employees would leave. At that time, it was not clear that damages would be available against a Member State (it was the third


Factortame case which established the remedy of state liability for legislation passed by Member States). Therefore, if there was no interim relief suspending the operation of the Act and allowing the fishing companies to carry on fishing, the final outcome of the main case in their favour may really have been of little benefit to the fishing companies.

b. They were called putative rights because they had not yet been established in the main case deciding whether the Merchant Shipping Act was in breach of Community law and therefore in contravention of the fishing companies’ rights.

Chapter 7

Activity 7.1 a. The Article 267 TFEU (ex Article 234 EC) reference procedure ensures the uniformity

of European Union law by the referring of questions of the interpretation and validity of European Union law to one central authority, the Court of Justice. This prevents disparate and conflicting interpretations of European Union law developing in the case law of different national courts.

b. Many of the most important and influential judgments of European Union law have come from references from courts at the very bottom of the court hierarchy (Costa v ENEL, van Gend). The use of Article 267 TFEU (ex Article 234 EC) by national courts at every level has allowed the effective penetration and absorption of European Union law into the national legal systems. If references could only be made from courts of final appeal, parties would be put though the expense of appealing through the national court hierarchy before they could have a point of European Union law which determines the case decided by the appropriate body. Many applicants would be unable to afford the time and expense involved. The success of the Court of Justice in recruiting all national courts to be European Union courts has significantly benefited the dissemination and acceptance of European Union law principles.

c. There is already a problem that, with the huge number of cases coming before the Court of Justice being heard in chambers of three or five, there can be conflicting judgments. This danger would be increased. It seems that the judges of the Court of Justice may also not have been happy to dilute their status by increasing their number.

d. The Court of Justice decided that the question of what is a court or tribunal for the purposes of Article 234 EC (now Article 267 TFEU) must be determined by European Union law not national law because the question of when a reference should be made concerns the nature of the proceedings.

e. Dr Broekmeulen had a qualification from Belgium. He was refused registration by the committee in the Netherlands. This is an area governed by the European Union law on services and establishment so it was important for him that the Court of Justice could rule on the European Union law applicable to the case. He was in danger of not being able to practise his profession.

f. To make a list of the factors that are taken into account when deciding whether a body qualifies as a court or tribunal for the purposes of Article 267 TFEU read the summaries of Broekmeulen and Dorsch Consult in 7.1.3.

Activity 7.2 a. Article 267(2) TFEU (ex Article 234(2) EC) sets out the discretionary reference where

a national court may, if it considers it necessary, make a reference. Under Article 267(3) TFEU (ex Article 234(3) EC), a court from whose decision there is no judicial remedy in national law shall make a reference where a point of Union law is raised. According to the wording of the Treaty, therefore, the reference under Article 267(3) TFEU (ex Article 234(3)) EC) is compulsory.


b. The guidelines set by the Court of Justice in its Guidance on References by National Courts for Preliminary Rulings are included in your Study Pack. You can also access them on the internet at: http://www.curia.europa.eu

c. Sir Thomas Bingham MR emphasises the superior expertise of the Court of Justice, its characteristic teleological (or purposive) approach and the possibility of intervention by the Commission and Member States in cases before the Court of Justice. He therefore appears to be more cautious than Denning J in recommending that national courts may decide matters of Union law themselves under the second paragraph of Article 267 TFEU (ex Article 234 EC) .

d. A national court from whose decision there is no judicial remedy must make a reference only when the CILFIT exceptions do not apply. So, if the Court of Justice has already ruled on the point, it does not need to make a reference. If the point of Union law does not determine the outcome of the case, it does not need to make a reference. If the matter is ‘acte clair’ meaning that it is clear and free from doubt, then the national court does not need to make a reference. However it should, in this last case, compare the different language versions of any relevant legislation and must be sure that the Court of Justice and other national courts would have decided the case the same way. This has, of course, become increasingly more difficult with the accession of new Member States and the fact that national courts in the Union now give judgments in 23 languages.

Activity 7.3 The answer should start by mentioning Article 267 TFEU (ex Article 234 EC) and briefly explaining what the reference procedure is (always tie a response to a question on Union law to the relevant Treaty Article). We will assume that the point about advertising services in other Member States raises a defence based on Union law. The issues to be dealt with in this problem are:

a. Is the committee a court or tribunal for the purposes of Article 267 TFEU (ex Article 234 EC) ?

b. Markus would like a reference to be made to the Court of Justice. The decision to refer is for the national court or tribunal. In this scenario, would a reference be:

a discretionary reference under Article 267(2) TFEU

a compulsory reference under Article 267(3) TFEU ?

c. What factors/law should be taken into account by the national court in deciding whether to make the reference? Is this a court or tribunal for the purposes of Article 267 TFEU? Apply the relevant factors cited in Broekmeulen and Dorsch Consult. Factors suggesting that it is a ‘court or tribunal’: The IFAA has been partly financed by the UK government and has powers under statute. This suggests that it is established by law and applies rules of law. It has compulsory jurisdiction. Its decisions will affect Markus’s livelihood. Factors suggesting that it is not: As the members of the committee are all members of the IFAA it might not be independent. Because this is a disciplinary hearing with Markus appearing in front of a panel, it appears not to be an adversarial, inter-partes proceeding. This is an important factor. Note that in Broekmeulen, the Committee was hearing appeals from an earlier ‘hearing’ so it was adversarial. It probably would be a court or tribunal, as not all factors have to be satisfied, but you really could conclude either way. You could conclude that the outcome on this point is not absolutely clear. What is important is to cite the relevant law with authority, apply it to the relevant facts and come to some kind of conclusion.

You then consider whether this reference is a discretionary one under paragraph (2) or a compulsory one under (3). If it is discretionary, you should cite Bulmer v Bollinger and R v International Stock Exchange ex parte Else. You should mention the Guidelines published by the Court of Justice even if there is not time to cite them in detail. The committee may avoid making a reference by saying that the point of Union law is irrelevant. Is it a compulsory reference under Article 267(3) TFEU?


It appears that this will fall under Article 267(3) TFEU (ex Article 234 EC) because Markus has no further appeal because he has been a member of the IFAA. It turns on whether the third paragraph of Article 267 TFEU (ex Article 234 EC) is interpreted as meaning the court of highest appeal in the judicial system (i.e. always the House of Lords in the UK) or the court of final appeal in the particular case. Even if this falls under the ‘compulsory reference’ pursuant to Article 267(3) TFEU (ex Article 234(3) EC) the committee can avoid making a reference by using the CILFIT exceptions, that the point of Union law is irrelevant to the outcome or that it is ‘acte clair’.

Summarise your answer.

Activity 7.4 a. The Court of Justice ruled that only it could find EU law invalid in Fotofrost so that

national courts could not undermine the uniformity of Community (now Union) law by finding secondary legislation of the EU invalid. There would be a question then as to whether the Union law would be invalid in other Member States and from what date. There would be uncertainty because national court judgments are not disseminated across the Union and may not be known about, or understood, in other Member States. And of course, there is a grave danger that the national court might make a mistake in deciding that Union legislation was invalid which would require correction.

b. The Court of Justice refused to take the reference in Foglia v Novello because it was a ‘manufactured’ dispute between the parties, who were seeking to challenge a tax in another Member State. The Court of Justice stated that ‘the duty assigned to the court by Article 177 [pre-Treaty of Amsterdam numbering, now 267 TFEU] is not that of delivering advisory opinions on general or hypothetical questions but of assisting in the administration of justice in the Member States. It accordingly does not have jurisdiction to reply to questions of interpretation which are submitted to it within the framework of procedural devices arranged by the parties…’.

c. It must be an inescapable conclusion that the Article 267 TFEU (ex Article 234 EC) reference procedure has been critical in ensuring the penetration of Union law into the legal systems of the Member States and hence has been essential in ensuring the effectiveness and uniformity of Union law.

d. The CILFIT judgment could be criticised in relation to these two principles because it has granted a discretion to courts from which there is no further appeal as to whether to make a reference or not. This discretion turns on the application of the acte clair doctrine by the national court. There is no further authority to scrutinise the decisions of the national court not to refer. It enables them to ‘bypass’ Union law. This could have an effect on the uniformity and effectiveness of Union law.

e. Interim relief is an important remedy because of the time taken for a reference to be made and the ruling of the Court of Justice to be received. The individual may well require protection from a breach of their ‘putative’ or possible Union law rights pending the decision of the Court of Justice.

Chapter 8

Activity 8.1 a. The purpose of the Article 258 TFEU (ex Article 226 EC) action is to ensure that

Member States comply with their Union law obligations. Actions are also sometimes taken so that an interpretation of the law can be tested.

b. The Article 258 TFEU (ex Article 226 EC) is an important part of the Commission’s duties under Article 17 TEU (ex Article 211 EC) because it has a role as ‘the Guardian of the Treaties’.

c. The principal weaknesses of this procedure are the length of time it takes and the fact that there is no deterrent penalty included in Article 258 TFEU (ex Article 226 EC). The


penalty only appears in the case of a second procedure before the Court of Justice (see Article 260 TFEU, ex Article 228 EC). These weaknesses affect the uniformity and effectiveness of Union law because Member States are able to avoid complying with Union law obligations for a considerable time. They can continue to fail to implement Union law, particularly Directives, and can ignore judgments of the Court of Justice defining the law. This means that the law is not the same in every Member State, that individuals’ EU law rights vary according to which Member State they are in, and this means that EU law is not uniformly effective across the European Union.

d. The principle of ‘dual vigilance’ means that in addition to the scrutiny of the Commission in ensuring proper implementation of EU law, individuals will also ensure that EU law is given effect to by means of direct effect.

e. Direct effect is an effective way of compensating for the weakness of the Article 258 TFEU (ex Article 226 EC) enforcement because thousands of individuals across the Union are motivated to enforce EU law, using direct effect, in order to receive a remedy. These remedies are sought in the national courts. This is a highly effective way of ensuring the correct observance of EU law by Member States.

f. The Article 258 TFEU (ex Article 226 EC) procedure was strengthened by the addition in Article 260 TFEU (ex Article 228 EC) of the penalty payment procedure by TEU in 1993. This enables another action to be taken by the Commission where a Member State fails to comply with an Article 258 TFEU (ex Article 226 EC) Declaration. The Commission can finally take the Member State to the Court of Justice, where substantial fines can be imposed.

g. This seemed an effective way of strengthening the Article 258 TFEU (ex Article 226 EC) procedure, and to some extent it is. However, it is a very long process from the initial complaint through to imposition of fines.

Activity 8.2 a. The administrative stage procedure facilitates a friendly settlement because it

starts as essentially a dialogue between the Commissions and the Member State. The Commission informs the Member State in an informal letter that it appears to be in breach of EU law, giving its reasons for thinking so. The Member State has the opportunity to remedy its apparent breach or to respond, explaining its actions or omissions. The dialogue continues with the two sides trying to come to agreement as to how to put an end to the apparent problem. Two-thirds of actions never reach the judicial stage.

b. The reasoned opinion sets out the grounds, both factual and legal, upon which the Commission maintains there is a breach of EU law by the Member State. It allows the Member State to know the details of the case against it. It gives the Member State a final chance to comply before the case goes to Court. No further charges can later be added by the Commission.

c. The Commission has both the power and the discretion to start actions under Article 258 TFEU (ex Article 226 EC). It would not be in keeping with its position as the ‘Guardian of the Treaties’ if individuals could force it to take action, using Articles 263 or 265 TFEU (ex Articles 230 or 232 EC). This would then mean that the Court of Justice would be supervising the Commission’s discretion to take action and that the Commission’s resources were being directed by actions of individual complaints. There may be a number of reasons why the Commission decides not to take action.

d. An action is still brought before the Court even if the Member State has remedied the breach but has done so after expiry of the time limit because otherwise Member States would leave it to the last moment, perhaps the doors of the court, to remedy a breach. They might then recommence the breach after the threat of action in the Court of Justice has been lifted. Since the introduction of state liability, it can also be important for an individual that the breach of the individual is established by the Court.


e. The steps taken by the Commission are: negotiation, including informal letter of notice of breach, formal notification – letter of formal notice, reasoned opinion, referral of Article 258 TFEU (ex Article 226 EC) case to the Court of Justice.

Activity 8.3 This question requires the following.

An introduction explaining the Commission’s role as the Guardian of the Treaties.

An explanation of what a Directive is, with reference to Article 288 TFEU (ex Article 249 EC), explaining that it needs to be implemented by a certain date. It should be mentioned that the Commission always takes action under Article 258 TFEU(ex Article 226 EC) for failure to implement a Directive on time.

An account of the Article 258 TFEU (ex Article 226 EC) procedure, setting out the steps taken by the Commission.

An evaluation, based on case law, of the likely outcome in the Court of Justice of the defences used.

The most relevant cases here would be:

1. Force majeure. Cite Commission v Italy. It could be distinguished because (a) the UK is rebuilding the centre and (b) it is four years rather than two.

2. Other Member States in breach. The Court of Justice is very unlikely to accept this argument. See Commission v UK (tachographs). A voluntary system is not adequate to comply with requirements of EU law. Internal difficulties such as trade union action is not a defence for the failure to comply. Commission v Germany (re nurses) could be distinguished, as the administrative guidelines suggested here are clearly not adequate. You could also use Commission v France – incomplete implementation of EU law.

Conclude that the Court of Justice would make a Declaration that the UK is in breach of its Union law obligation. If it still failed to take the correct action, the Commission would start an Article 260 TFEU (ex Article 228 EC) action which might end in the Court of Justice imposing heavy fines.

Activity 8.4 a. An individual has the option of complaining to the Commission. If the measure

satisfies the requirements for direct effect, the individual may be able to use its direct effect to seek a remedy in the national court. If the breach is non-implementation of a Directive or another ‘sufficiently serious’ breach of EU law, the individual may be able to sue the Member State in an action for state liability.

b. Under Article 4 TEU (ex Article 10 EC) Member States are obliged to take all appropriate measures to fulfil their obligations under the Treaty, to facilitate the achievements of the Community’s tasks and to not take any measures which could undermine the achievement of the objectives of the Treaty. It has been used by the Court of Justice to support supremacy (see Costa v ENEL) and to ground the action for state liability (Brasserie du Pecheur). It has been increasingly used by the Court of Justice to support its case law and by the Commission in actions under Article 226 EC. It is the principle that makes clear the duty of the Member States to actively support the aims and objectives of the Treaty and to abstain from measures which hinder their achievement.

c. The most common reason for Article 258 TFEU (ex Article 226 EC) actions is the non-implementation of a Directive.

d. The possibility of an Article 258 TFEU action deters Member States from breaching Community law. Its informal administrative stage enables many breaches to be resolved by friendly negotiation. Where a Member State persists in a breach, the effectiveness of Article 258 TFEU EC action is diminished by the length of time the process takes and the lack of a serious penalty. Its effectiveness has been


sharpened by the addition of the Article 260 TFEU (ex Article 228 EC) action, and, as the first fines are imposed, this may have a further deterrent effect. The evidence is that Member States continue to breach EU law. Because there are so many ways that the Member State can default from its EU law obligation, as you will see when you study the free movement provisions, it would be impossible for the Commission to police them all. It is therefore very important for the effectiveness and uniformity of EU law that direct effect and state liability have been introduced by the Court of Justice.

e. The advantages of the enforcement action under Articles 258 and 260 TFEU (ex Articles 226 and 228 EC) are that:

it starts as a friendly dialogue between the Commission and the Member State with many issues resolved through this process

the Article 260 TFEU fines are a real deterrent to sustaining breaches of EU law

it may achieve the termination of a breach of EU law at no cost to a complainant

an Article 258 TFEU declaration that a Member State is in breach will facilitate a state liability action by an individual.

The disadvantages are that:

it is a lengthy process

Article 258 TFEU (ex Article 226 EC) has no effective penalty necessitating another procedure under Article 260 TFEU (ex Article 228 EC), increasing the length of time before a result

there is no remedy for the individual.

Chapter 9

Activity 9.1 a. In 1986 in Les Verts the European Court of Justice court stated that the European

Community was ‘a Community based on the rule of law’ with a ‘basic constitutional charter, the Treaty’ (Case 194/83 Les Verts v Parliament, paragraph 23). That it was possible to refer to ‘the rule of law’ of the EEC at all was a triumph of the Court of Justice itself, which had, by a series of landmark decisions, established a recognised regime of European law.

The rule of law is the principle that governments should act within their legal powers, according to the law. It requires the possibility that acts of government should be scrutinised by the Courts to ensure their lawfulness. When the Parliament (then the Assembly) was created in 1952, it had no power to carry out acts that had legal consequences for other persons/parties. It therefore was not thought necessary to permit an action for judicial review of its actions under Article 263 TFEU (ex Article 230 EC). As we have seen, since then, its powers had grown significantly. Since it now had power to ‘act’ in a way which affected the legal position of third parties, the Court of Justice decided that it was required by the imperative of respect for rule of law that its acts could be scrutinised to ensure their lawfulness by judicial review proceedings. The Court effectively rewrote the Treaty. The decision was circumscribed, however, by the judgment, which said that acts of the Parliament could be judicially reviewed where they has legal effects vis-à-vis third parties.

b. ‘… the Court has adopted a generous and dynamic interpretation of the Treaty’, or even a position contrary to the text, to ensure that the evolution in the powers of the Union institutions does not undermine the rule of law and the institutional balance. In Case C-50/00 P Unión de Pequeños Agricultores v Council Advocate General Jacobs was referring to the decision in ERTA as to which ‘acts’ can be challenged under Article 263 TFEU and the cases establishing status under Article 263 TFEU for the European Parliament as an institution which could have its acts reviewed


and which could bring actions for judicial review. Here, the Court of Justice was willing to rewrite the express wording of the Treaty. In negotiations for the SEA, the suggestion that acts of the Parliament should be included in Article 263 TFEU was put forward by the Commission and specifically rejected by the Member States. Yet the Court of Justice was willing to override this a few years later.

c. See answer to part a.

d. It is true that case law of the Court of Justice has enhanced the status of the Parliament in the Union institutional balance, rewriting the Treaty on occasion. However, notice that it was initially reluctant to give the Parliament standing to bring actions for judicial review (see Comitology) and only did so in the Chernobyl case because, in this scenario, the Commission was not supporting the Parliament’s case. There was therefore no other institution to bring an action for judicial review to ensure that the correct legal base was used. Additionally, there seems little doubt that there would have been a grave anomaly, and indeed, a breach of the rule of law, if the act complained of in the Les Verts case could not have been judicially reviewed. Once the Parliament exercised real powers, such as the allocation of monies, it was important that its actions were subject to review.

e. In Roquette Frères v Council and Maizena v Council, the Court of Justice held that the European Parliament had the right to intervene in cases before the Court, like the other institutions. In Les Verts, it stated that acts of the European Parliament which had legal effect vis-à-vis third parties could be judicially reviewed. In Parliament v Council (Chernobyl) it held that the Parliament could bring actions for judicial review ‘to protect its prerogatives’. The wording of these last two judgments was incorporated into a revised Article 230 EC (now Article 263 TFEU) by the Maastricht TEU. Since the ToN, the Parliament has had fully privileged status under Article 263 TFEU like the other institutions.

f. It is important that the Parliament should have privileged status under Article 263 TFEU so that it can, like the other institutions, have the power to judicially review any act of the EU which might not be legal. It can act as a scrutineer of acts of the Union in general and bring an action, not just to ‘protect its own prerogatives, but to uphold the lawfulness of Union action’.

g. The ERTA case is important because it means that acts which have legal effects cannot escape judicial review by simply not falling under one of the three recognised forms of secondary legislation listed in Article 288 TFEU (ex Article 249 EC). The powers of the Union are far-reaching and sometimes the borderline between ‘soft’ law, which does not have legal effect, and actual binding acts is not well defined. This judgment means that all acts which have legal effects on third parties are subject to scrutiny by the Courts.

Activity 9.2 a. Plaumann was clearly affected by the Commission decision as it affected what

imported clementines cost him.

b. You could list the clementine importers into Germany at the time of the decision.

c. The Court held that he was not individually concerned because he carried out a commercial activity that could be carried out by any person at any time. He is not part of a ‘closed group’ but part of an ‘open’ group, that is, clementine importers – a group to which anyone can theoretically be added at any time. It seems that the Court of Justice does not look at the ‘group’ at the time of the decision. At that moment, the number of clementine importers in Germany could have been listed. Instead it considers the group in the future; could this group be added to in the future; could further clementine importers join the group – and the answer is yes. So Plaumann is not ‘singled out’ like the initial addressee.

d. The Court appears to be concerned to prevent too many cases under Article 263 TFEU being brought by non-privileged applicants. As you read these cases, you will see that Union law is highly regulatory, setting down, for example, requirements


for licences and quotas which must be fulfilled by traders and farmer. These regulations frequently change the legal position of companies and applicants. Often some groups are affected adversely and the Court of Justice appears to wish to discourage large numbers of Article 263 TFEU challenges to such EU secondary legislation.

e. The general class of Greek yarn manufacturers tried to distinguish themselves from the clementine importers in Plaumann by pointing out that such businesses took considerable resources and time to establish. They did not succeed. The Court simply repeated that theirs was a commercial activity which could be carried out by any person at any time. Those Greek yarn manufacturers who had contracts for delivery in France within the dates specified in the decision were individually concerned.

f. For both these groups, what defines them relates to past events. In Patraiki-Patraiki, it is those yarn manufacturers who had already signed contracts for delivery within the specified dates. In Toepfer, it was grain dealers who applied for licences on a certain day. No-one can ever be added to these groups because they are defined in regard to past, completed events.

Activity 9.3 a. We have a judgment of both the CFI (now the General Court) and the Court of

Justice in the Jégo-Quéré case because the CFI judgment is the initial action under Article 230 EC (now Article 263 TFEU), where the applicants sought standing. The CFI’s decision granting them standing under the new test for individual concern was then appealed to the Court of Justice.

b. The applicants in the two cases above would have no proper remedy if they were denied standing under Article 263 TFEU because the legislation at issue was, in both cases, a Regulation. Because Regulations are directly applicable, there would not be any national implementing measures which could be challenged in the national court leading to an Article 267 TFEU reference.

c. It would have been possible for the applicants in the Jégo-Quéré case to fish using the wrong mesh size in their nets. They could have then raised the validity of the Regulation as a defence. It cannot be appropriate that the only legal remedy should be obtained by breaking the law. The CFI rejected this as an appropriate remedy:

The fact that an individual affected by a Community measure may be able to bring its validity before the national courts by violating the rules it lays down and then asserting their illegality in subsequent judicial proceedings brought against him does not constitute an adequate means of judicial protection. Individuals cannot be required to breach the law in order to gain access to justice (paragraph 45).

d. Advocate General Jacobs and the CFI alleged that the right to effective judicial protection, a principle recognised in EU law, was breached by the case law on individual concern, as were Articles 6 and 13 of the ECHR and Article 47 of the Charter of Fundamental Rights. Article 47 states that everyone ‘whose rights and freedoms guaranteed by the law of the Union are violated has the right to an effective remedy before a tribunal’. The Charter was not binding at the time but has now been made legally binding by the Treaty of Lisbon (Article 6(1) TEU).

e. Advocate General Jacobs contrasted the Court of Justice’s restrictive case law on standing with its expansive interpretation of ‘acts’ and the standing of the European Parliament under Article 230 EC (now Article 263 TFEU).

f. In UPA, the Court of Justice is saying, in effect, that the test for standing for a non-privileged applicant is determined not by its case law but by the wording of the Treaty. It would therefore take Treaty amendment to change it.

You can conclude as you wish, but should weigh the benefits of efficient administration against the requirements of effective judicial protection of the individual.


g. How do the changes in Article 263(4) TFEU affect the cases described above?

The Lisbon Treaty has rewritten the Treaty Article for judicial review. In regard to a decision addressed to another, the word ‘decision’ has been replaced by the word ‘act’ giving it a wider meaning (an act having legal effect, but not necessarily a ‘decision’ under Article 288 TFEU), but the requirement of direct and individual concern remains, and the test for standing would be the same.

Both Jégo-Quéré and UPA concerned Regulations. The wording of the new Treaty Article, Article 263 TFEU has been changed in regard to standing, where the legal measure which the applicant is seeking review is ‘a regulatory act’. It is no longer necessary for the applicant to demonstrate that the Regulation is a disguised ‘decision’ or ‘bundle of decisions’. Now, the applicant only has to show ‘direct concern’ (not individual concern) in order to have standing to challenge ‘a regulatory act… [which] does not entail implementing measures.’

It is not yet clear what ‘regulatory’ acts means. If it means all Regulations, then the applicant in both Jégo-Quéré and UPA would only have to establish ‘direct concern’ which arguably they could have done and they would have been granted standing. But we will have to wait for the Court of Justice’s interpretation of this term.

Activity 9.4No feedback provided.

Chapter 10

Activity 10.1 a. If the inspection was required under national law (i.e. it was not voluntary),

then the fee would amount to an illegal charge: cite Cadsky, Bresciani, Denkavit Futtermittel.

If the inspection was done at the request of the trader, in order to qualify for the certificate, then it may be a fee for a genuine service which has been provided for the benefit of the individual trader and, as such, would not breach Article 30 TFEU (ex Article 25 EC). Cite, for example, Commission v Belgium (public warehouses).

b. Normally a breach of Article 30 TFEU (ex Article 25 EC), unless some extra specific service has been requested by the importer/exporter: cite fees at frontier case, Ford España.

Activity 10.2 a. The CCT lays down the levels of duty payable on goods from non-Member States.

Member States cannot impose any additional customs duties at all. As for CEEs, mention should be made of the Diamantarbeiders case in relation to third country goods.

As the goods have already been imported into Denmark, another Member State, it is likely that they have already paid the CCT and gone through any other customs formalities for goods entering the EU and are in ‘free circulation’ (Article 29 TFEU (ex Article 24 EC). This would make it illegal for any charges to be made on importation to the UK (Article 28(2) TFEU (ex Article 23(2) EC) and case Donckervolke).

b. The issue to be discussed is whether the storage charge is an illegal charge on imports, contrary to Article 30 TFEU (ex Article 25 EC), or a genuine fee for a service rendered to the importer. The test for an illegal charge should be stated, and the test for a service. Relevant case law: Statistical Levy case and Commission v Belgium (public warehouses).

Even if it is a genuine service, the basis for calculating the charge is not based on the actual costs of providing that service. It would be disproportionate and, therefore, illegal: case Ford Espana.


c. (i) Illegal charge because it does not fulfil the test for an internal tax as it does not apply irrespective of origin.

(ii) Legal as an internal tax.

d. Issue: can a Member State charge for the cost of health and safety testing of imported goods?

Basic rule: no, it is a breach of Article 30 TFEU (Cases: Cadsky, Bresciani, Denkavit Futtermittel).

Exception for inspection mandatory under an EU Directive (Cases: Bauhuis, Commission v Germany).

Conclusion: the charge is lawful provided that:

the UK is not going beyond what is obligatory under the Directive

and that the Directive itself does not say who is to pay for the tests

and that the amount charged is based on the actual cost of carrying out the tests.



Activity 10.5 A case of indirect discrimination if it can be shown that the environment tax has a ‘protective effect’ for domestically manufactured cars.

Relevant case law to discuss: 112/84 Humblot [1985] ECR 1367; 433/85 Feldain [11087] ECR 3536; 132/88 Commission v Greece [1990] ECR I-1567.

The issue is whether customers will be deterred from buying an imported car because of this tax. Will it have such an impact on the price of cars over 2000cc that customers will choose instead a model with a smaller engine, and so be more likely to buy a home-produced car? In Humblot the Court, on similar facts, decided that it would and that a graduated scale should be introduced instead of the one big tax leap at a particular engine size. This would reduce the impact of the tax on the price of cars in each band of the scale, thereby removing the protective effect for domestic cars.

Activity 10.6 This looks like a case of indirect discrimination since the basis for the higher rate of tax means that, in practice, it will apply almost exclusively to imported goods. The issue is whether it can be justified on policy grounds. Relevant case law to discuss: 140/79 Chemial Farmaceutici v DAF [1981] 3 CMLR 350, [1981] ECR 1 (industrial policy justification); 200/85 Commission v Italy [1986] ECR 3953; 196/85 Commission v France [1987] ECR 1597 (naturally sweet wines – regional policy).

Given that, in theory, it is non-discriminatory, in that those few Swedish drinks over 30 per cent proof would pay the higher tax and imported spirits and fruit liqueurs would also benefit from the lower tax rate, it is likely that the higher tax would be held to be legal on the basis of the above case law.

Activity 10.7 No specific feedback is provided because this exercise is designed to get you to think about the concept of trading rules by thinking of examples from your own daily life (for example, in the UK can you buy cannabis at your local corner shop? Can children buy fireworks? Can you buy a pint of beer at your local café? Are there any restrictions on what can be advertised on television? etc.) and to think about the link between trading rules and the public interests they are designed to protect. From this it should


be clear that such rules cannot simply be prohibited and a way has to be found to accommodate them within the rules on free movement of goods.

Activity 10.8 a. The French government had condemned the acts of vandalism by French farmers

but the French police had not intervened to stop them. They argued that police intervention might have provoked even more serious breaches of public order. This was rejected because the French government had not shown that, if it intervened, there was a danger to public order with which it could not cope. There is a clear duty on Member States to take necessary and appropriate measures to ensure the free movement of goods on their territory, and public policy grounds will rarely justify Member States’ failure to do this. See also, on this issue, Case 231/83 Cullet v Centre Leclerc [1985] ECR 305.

b. In Case 34/79 R v Henn and Darby, the Court of Justice, having considered the facts, held that there was no lawful trade in the United Kingdom in the types of materials that the pornographers were trying to import. The overall purpose of UK law was to restrain the manufacture and marketing of pornography. On the other hand, in Conegate, while there were restrictions in the UK on the marketing of the life-size rubber dolls which the company was seeking to import, ‘the restrictions [could not] be regarded as equivalent in substance to a prohibition on manufacturer and marketing’.

Activity 10.9 The French rule is a MEQR as it is hindering imports of a product from another Member State, contrary to Article 34 TFEU (ex Article 28 EC).

The first issue is the effect of the Community Directive. If it was in force, it would no longer be open to France to impose its own rules on salt levels (Moorman case).

As it is not yet in force, however, France can still try to justify imposing its own rule on imports, on the basis of the public health derogation in Article 36 TFEU (ex Article 30 EC).

France would have to prove that its 0.5 limit is necessary to protect public health, and that it is proportionate (no less restrictive way of achieving that aim); cite, for example, Commission v Germany (Additives in Beer). The Court will have regard to the scientific evidence and views of health organisations internationally and in other Member States. Conclusion: the fact that the Community directive will permit 0.75 milligrams suggests that this is regarded as a safe level by the majority of Member States and that France is unlikely to succeed under Article 36 TFEU (ex Article 30 EC) in imposing a stricter rule.


Activity 10.11 a. Product requirement, equally applicable/dual burden: possible justification under

Cassis mandatory requirement: environmental protection.

b. Product requirement, equally applicable/dual burden: possible justification? Cassis – Consumer protection? Unlikely to succeed: Court more likely to say disproportionate to impose this on imported fruit conserve because of principle of mutual recognition. Labelling as to fruit content would be a less restrictive way of achieving consumer protection.

c. A label is a product requirement: equally applicable/dual burden. Possible justification on grounds of consumer protection.

d. Product requirement; discriminatory; possible justification under Article 36 TFEU (ex Article 30 EC) but only if inspections carried out in exporting state can be shown to be inadequate – unlikely.

e. Selling arrangement; equal burden under Keck; legal.


f. Probably a selling arrangement and so legal, provided access to the market for imports is not made more difficult thereby than for domestic goods (Gourmet).

Chapter 11

Activity 11.1a. Vertical agreement restricting intra-brand competition because B cannot compete

with other distributors of A’s products outside England and Wales.

b. Horizontal agreement which restricts inter-brand competition by sharing markets between manufacturers rather than competing with each other on all markets.

c. Horizontal agreement because parties both operate as distributors; restricts intra-brand competition because they both distribute the same brand of car.

Activity 11.2 Cite the definitions of concerted practice from the Dyestuffs and Sugar Cartel cases. There has been contact between the companies. Did it have the object or effect of restricting competition?

Cite case law on information exchange: announcing your plans as to market strategy or pricing could be concerted practice if the object is that competitors will be able to adjust their own plans accordingly (i.e. cooperate rather than compete). Cite Tate & Lyle/British Sugar case. The facts suggest the exchange of information is intended to lead to ‘market sharing’ – dividing the market between them rather than competing with each other on all the European markets.

The issue of the simultaneous price increase of five per cent: this could be the result of ‘price collusion’ as in Dyestuffs, but there is the problem of proof. Woodpulp: is there an alternative plausible explanation? Perhaps the recent increase in the cost of raw materials? Alternatively, consider whether the luxury watch market may be an oligopoly. State the characteristics of an oligopolistic market. We are not told how many manufacturers there are in this market. If it is an oligopoly, the companies may invoke this as a defence – a plausible alternative explanation for the parallel price increases.

Activity 11.3a. Although both firms are in one Member State, there could be an effect on trade

between Member States if their cooperation in the joint venture results in the device reaching the market sooner than if they developed it separately. It will be exported to other Member States sooner – that is an effect! (Example based on Commission Decision in: Re Vacuum Interrupters.)

b. It is not necessary for companies to be based in the EU for the EU competition rules to apply to them. When they sell the goods to an EU customer, they have ‘implemented’ their agreement in the EU, giving the Commission jurisdiction over their price-fixing agreement (Case: Woodpulp).

c. Under EU competition law, a parent and its subsidiary are regarded as a ‘single entity’. Unless it can be shown that the subsidiary is genuinely free to pursue its own commercial policies, the parent is liable. See: Case 15/74 Centrafarm v Sterling Drug [1974] ECR 1147.

Activity 11.4 No feedback provided: the answers can all be found in the Court of Justice’s judgment.

Activity 11.5a. Vertical restraint because Washco and the distributors are at different levels in the

chain of production/distribution. This will deter retailers from obtaining supplies of Washco machines from distributors in other Member States, even if they could thereby obtain them more cheaply. It restricts price competition between


the distributors of Washco machines in different Member States (‘intra-brand’ competition). It amounts to an indirect export ban, compartmentalising the market along national lines.

b. Another example of a vertical restraint designed to deter export of cars from one Member State to another, to compartmentalise the market, and to prevent price-competition between distributors in different Member States. (This is similar to the facts of Case Commission Decision IV/35.733 Volkswagen; upheld in T-62/98 Volkswagen v Commission [2000] ECR II-2707 [2000], 5 CMLR 853.)

Activity 11.6 a. A dominant position (market power) is a pre-requisite for a breach of Article 102

TFEU (ex Article 82 EC) and only exists in relation to a specific market.

b. The characteristics of the banana which made them particularly suitable for the sick, the elderly and the very young. Other fruits did not fulfil the needs of these sections of the population and so were not ‘interchangeable’ with bananas in the eyes of consumers.

c. Read the Notice and note the key stages of the process, including use of the SSNIP test.

d. Explain the two tests – demand-side and supply-side substitutability as applied in United Brands, Continental Can. Commission Notice: SSNIP test – if the price of fountain pens rises significantly (5–10 per cent), would so many customers switch to buying biros instead that the rise in the cost of fountain pens would prove unprofitable because of the fall in sales? Or do fountain pens have particular characteristics in the eyes of consumers which mean that they will still buy the fountain pen? On the supply-side, the test is whether a manufacturer of biros can quickly and easily adapt its plant to turn out fountain pens instead: if so manufacturers of biros must be regarded as competitors of fountain pen manufacturers.

e. No feedback provided.

Activity 11.7

Problem questionBegin by explaining Article 102 TFEU (ex Article 82 EC) requirements for a breach.

Relevant product market: film processing services.

Relevant geographic market: probably UK because customers want quick turnaround, so are unlikely to switch to a processor in another Member State (Commission’s Notice on Definition of Relevant Market).

Definition of dominance: multifactoral test, United Brands, factors – is 42 per cent enough? Consider brand loyalty, network etc. as contributing to dominant position.

Abuses: predatory pricing (Akzo)

loyalty discounts (Hoffman-La Roche, Michelin)

refusal to supply Superpill (United Brands).

Chapter 12


Activity 12.2a. To prevent Member States placing unilateral restrictions on those who can benefit

from the free movement rights under Article 45 TFEU (ex Article 39 EC): see Levin case, paragraphs 12–14.


b. See Levin paragraph 15: purposive interpretation designed to make Community law more effective in raising the standard of living – part-time work is ‘an effective means of improving… living conditions’ even if earnings are below subsistence level.

c. Levin test: is the activity effective and genuine, not marginal and ancillary. Also Lawrie Blum test: does the person perform services for, or under the direction of, another in return for remuneration?

d. Antonissen: right to reside is limited to a reasonable period in which to find work (three to six months) and Lebon: right to equal access to employment but not to the same social and tax advantages as nationals under Article 7(2) of Regulation 1612/68. Now covered by Articles 14(4)(b) and 24(2) of Directive 2004/38.

e. Peter would have to show that he is still actively seeking work (it does not sound as if he is!) and that he has a genuine chance of finding it (Article 14(4)(b) of Directive 2004/38). This might depend on his level of knowledge of the Italian language and how far this is necessary in order to work as a car mechanic (see later, Article 3(1) of Regulation 1612/68).

Activity 12.3 Discuss the definition of public service for Article 45(4) TFEU (ex Article 39(4) EC) and the test laid down by the Court in Commission v Belgium and in Case 66/85 Lawrie Blum. Trainee teaching post would not fulfil the test so Belgium would be in breach of Article 45 TFEU (ex Article 39 EC). The language requirement must be considered under Article 3(1) of Regulation 1612/68: is knowledge of Flemish required by the nature of the job? Is any teaching done in Flemish? Is the standard of Flemish required proportionate (not too high for the purpose). If this is merely a ‘cultural’ requirement and it is not the language of tuition, it may still be permissible but a lower level of knowledge should suffice: see Case 379/87 Groener, Case C-281/98 Angonese.

Activity 12.4a. Amir is still a worker even though now part-time (Levin) so he continues to benefit

from full rights under Regulation 1612/68. Under Article 7(2) of that Regulation, and under Article 24(1) of Directive 2004/38, he is entitled to social security benefits on the same basis as German nationals.

b. Under Directive 2004/38, Article 7(1)(d), Francesca has a right to live in London even though she is not an EU national and is separated from her husband who is a EU national (Diatta). She is a spouse under Article 2(2)(a). She qualifies for equal treatment under Article 24(1) of the Directive. She should not be charged the higher rate of fees.

Activity 12.5a. In van Duyn, membership of the Church of Scientology was allowed for UK

nationals, yet the UK was allowed to exclude a non-UK national who was a member, that is, to discriminate against non-nationals. In contrast, in Adoui, the Court placed the emphasis on non-discrimination, saying that Belgium can only deport non-national prostitutes if it was also taking ‘repressive measures’ to prevent such activity by its own nationals. Article 27(2) of Directive 2004/38 now requires measures on public policy grounds to be proportionate and based on personal conduct rather than general prevention.

b. Any decision to deport Gloria must be based on her ‘personal conduct’ (Article 27(2) of Directive 2004/38). Membership of a proscribed organisation can amount to personal conduct provided it is current active membership showing identification with the aims of the organisation concerned (Van Duyn). On the other hand, is membership of this organisation prohibited or discouraged for British nationals? (Adoui). She would have procedural protections under Articles 30–31 of the Directive. Article 30(3) precludes immediate deportation. She must have the right to challenge the decision (Article 31(1)).


Activity 12.6a. Catherine held the nationality of one Member State (Ireland) while living in

another (UK). This was enough to give the case a Community dimension.

b. The only provision which could confer an independent right to reside on a baby was Directive 90/364 on the General Right of Residence (the baby was clearly not a worker, service-provider, self-employed person, student or retired person). The relevant limitations and restrictions were, therefore, those contained in that Directive (medical insurance and sufficient resources requirements). (These are now laid down in Article 7(1)(b) of Directive 2004/38.)

c. The mother, being a Chinese national, had no personal right under Community law to reside in the UK. She could not derive a right as a family member because that only applies to parents and grandparents who are dependent on the EU national who is exercising the primary right. But to deny her mother a right to reside would effectively defeat the baby’s own right, as her mother was her primary carer. The Court, therefore, decided that the mother’s right was implicit in the child’s right. This reasoning would not seem to cover her father and brother, who might be able to base their claim on the right to respect for family life under Article 8 of the European Convention on Human Rights. This Article is not part of European Union law, but the Court has emphasised the need for Member States to take this right into account when dealing with family members who are not, strictly speaking, covered by Community law (cite, for example, Baumbast and Akrich cases). The right to family life is also now enshrined in Article 7 of the Charter of Fundamental rights in the European Union, which has been made binding under Article 6(1) TEU.

Activity 12.7Helena’s motive in moving to Spain to work is irrelevant. The test is whether she is performing effective and genuine economic activity in the host state (Levin). The duration of her employment in the host state will be relevant to that assessment (Singh). If she is a genuine worker, she would be entitled to be joined by her grandmother (relative in the ascending line) provided the grandmother is dependent on her (Article 2(2)(d) of Directive 2004/38), and subsequently to return with her to the UK (Singh). However, Akrich appears to have added a requirement for the family member to have been lawfully resident in a Member State before moving to join the worker in the host state. If Helena’s grandmother is living in Switzerland, this requirement would not be fulfilled. The Court must also bear in mind Article 7 of the Charter of Fundamental Rights (and Article 8 of the European Convention on Human Rights) which protects the right to ‘family life’.

Chapter 13


Activity 13.2 a. Maria. In England, teaching is a ‘regulated profession’ and so is covered by Directive

2005/36. Article 13 of the Directive states where access to a regulated profession in a host Member State ‘is contingent about the possession of professional qualifications , the competent authority of that Member State shall permit access to and pursuit of that profession under the same conditions as apply to its nationals, to applicants possessing the attestation of competence or evidence of formal qualifications required by another Member state in order to gain access to and pursue that profession on its territory’.

This basic rule is subject to two provisos set out in Article 14 of the Directive.

The host Member State may require the applicant to complete an adaption period of up to three years or to take an aptitude test if (Article 14(1)(a) the


duration of the training is at least one year shorter that that required by the host Member State, or 14(1)(b) there are substantial differences in the content of the training or the activities a person is qualified to perform.

b. Sara. Even though Denmark has recognised Sara’s Japanese diploma, this is not binding on Sweden: Case Tawil-Albertini. The Directives on mutual recognition of qualifications only apply to qualifications obtained in the Member States. There is a Council recommendation (OJ 1989 L19/24) which urges Member States to consider qualifications obtained outside the EU but they are not obliged to do so. Sara will have to rely on the basic principle of mutual recognition laid down in Vlassopoulou. This will require Sweden to take into account her knowledge, even if gained in a non-Member State (Hocsman) and experience gained in another Member State, that is, in Denmark (case Haim). She has a right to reasons for the refusal and a right to challenge it through judicial review (Vlassopoulou).

c. Saeed. Non-EU nationals have no rights under Union law to recognition of qualifications or to practise even if they qualified within another Member State of the Union. The Directives on mutual recognition only apply to ‘nationals of the Member States’, as does Article 49 TFEU (ex Article 43 EC).


Activity 13.4The Court places considerable emphasis on the nature of the service in order to determine the level of consumer protection necessary. To this extent the approach is consistent. It could be argued that, in the absence of harmonisation, it is up to each Member State to decide what level of protection to provide, yet in Säger, the Court of Justice rejected that and appeared to be establishing the appropriate ‘European standard’. A key factor in the Alpine case was the practical problem – the fact that UK measures involving tape-recording of sales calls could not be imposed on service providers from abroad meant that the Court was more willing to accept the Dutch measure.

Chapter 14

Activity 14.1 a. Direct discrimination can never be justified.

b. We now have a definition of indirect effect in the amended ETD and Directive 2006/54 – see above.

c. A prima facie case of indirect discrimination is established where one group of workers is disadvantaged in terms of ‘pay’ (giving that term the broad interpretation adopted by the Court). Access to the group which is paid more is dependent on some condition which ‘a considerably smaller percentage of women is able to fulfil’, such as working full-time or having been in continuous employment for a certain amount of time.

d. Many possibilities from case law cited above. For example, against part-timers: Rinner-Kühn – six weeks’ sick pay; Jenkins v Kingsgate – lower hourly rate. Against persons who had not worked continuously for a sufficient period: Seymour-Smith – protection from dismissal; Bilka – access to an occupational pension scheme.

e. When a prima facie case of indirect discrimination is established the employer or Member State bears the burden of proof for demonstrating that it is justified on grounds other than sex discrimination.

f. Danfoss and the Burden of Proof Directive.

g. The employer bears the burden of proof of demonstrating that it is for other factors than sex discrimination.


h. The measures must correspond to a real need on the part of the undertaking. They must also be appropriate to achieving the objectives pursued and necessary to that end.

i. In Enderby v Frenchay speech therapists, who were predominantly women, were paid less by the Health Authority than clinical psychologists and pharmacists.

Activity 14.2 Article 157 TFEU (ex Article 141 EC) concerns ‘pay’ as broadly interpreted by the Court of Justice. The ETD concerns equal treatment in regard to matters like: appointment, access to employment, conditions relating to dismissal, promotion.

The exceptions in the ETD are contained in Articles 2(2) and 2(4). Article 2(2)ETD: ‘activities for which the sex of the worker constitutes a determining factor’ and 14(2) Directive 2006/54. Article 2(4): permits measures which ‘promote equal opportunity for men and women, in particular by removing existing inequalities which affect women’s opportunities’.

Two examples of the use of Article 2(2) of the Directive to reserve professions to one sex are:

exclusion of men from midwifery: 165/82 Commission v UK

exclusion of women from the Marines: 273/97 Sirdar v The Army Board.

In Webb v EMO, the Court of Justice ruled that the position of a woman who is incapable of performing the task which she has been recruited to deal with is not comparable to that of a man similarly incapable for medical or other reasons.

In the case of Hertz, Ms Hertz was not protected by the ETD as her illness, though related to pregnancy, manifested itself after maternity leave. She was in the same position as a man who took extended periods of sick leave.

Discrimination on the grounds of pregnancy is direct discrimination. Men do not become pregnant!

Ms Dekker was not recruited because she was pregnant. This situation is still covered by the ETD. The Pregnancy Directive does not address this.

Activity 14.3 In Case C-167/97 Seymour-Smith and Perez [1999] ECR I-623 the Court of Justice held that:

A judicial award of compensation for breach of the right not to be unfairly dismissed constitutes ‘pay’ within the meaning of Article 141. The conditions determining whether an employee is entitled to obtain compensation when he/she has been unfairly dismissed fall within the scope of Article 141 [now Article 157 TFEU].

However, the conditions determining whether an employee who has been unfairly dismissed is entitled to obtain reinstatement or re-engagement fall within the scope of the Equal Treatment Directive 76/207.


Appendix 1Table of equivalent Article numbers


The following table of equivalences is taken from the EUR-Lex website http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2010:083:0361:0388:EN:PDF

© European Union, http://eur-lex.europa.eu/

Only European Union legislation printed in the paper edition of the Official Journal of the European Union is deemed authentic.

TABLES OF EQUIVALENCES (*)

Treaty on European Union

Old numbering of the Treaty on European Union

New numbering of the Treaty on European Union

TITLE I — COMMON PROVISIONS TITLE I — COMMON PROVISIONS

Article 1 Article 1

Article 2

Article 2 Article 3

Article 3 (repealed) ( 1 )

Article 4

Article 5 ( 2 )



Article 6 Article 6

Article 7 Article 7

Article 8

TITLE II — PROVISIONS AMENDING THE TREATY ESTABLISHING THE EUROPEAN ECONOMIC COMMUNITY WITH A VIEW TO ESTABLISHING THE EUROPEAN COMMUNITY

TITLE II — PROVISIONS ON DEMOCRATIC PRINCIPLES

Article 8 (repealed) ( 5 ) Article 9

Article 10 ( 6 )

( 1 ) Replaced, in substance, by Article 7 of the Treaty on the Functioning of the European Union (‘TFEU’) and by Articles 13(1) and 21, paragraph 3, second subparagraph of the Treaty on European Union (‘TEU’).

( 2 ) Replaces Article 5 of the Treaty establishing the European Community (‘TEC’). ( 3 ) Replaced, in substance, by Article 15. ( 4 ) Replaced, in substance, by Article 13, paragraph 2. ( 5 ) Article 8 TEU, which was in force until the entry into force of the Treaty of Lisbon (hereinafter

‘current’), amended the TEC. Those amendments are incorporated into the latter Treaty and Article 8 is repealed. Its number is used to insert a new provision.

( 6 ) Paragraph 4 replaces, in substance, the first subparagraph of Article 191 TEC.

EN 30.3.2010 Official Journal of the European Union C 83/361

(*) Tables of equivalences as referred to in Article 5 of the Treaty of Lisbon. The original centre column, which set out the intermediate numbering as used in that Treaty, has been omitted.



Article 11

Article 12

TITLE III — PROVISIONS AMENDING THE TREATY ESTABLISHING THE EUROPEAN COAL AND STEEL COMMUNITY

TITLE III — PROVISIONS ON THE INSTITUTIONS

Article 9 (repealed) ( 7 ) Article 13

Article 14 ( 8 )

Article 15 ( 9 )

Article 16 ( 10 )

Article 17 ( 11 )

Article 18

Article 19 ( 12 )

TITLE IV — PROVISIONS AMENDING THE TREATY ESTABLISHING THE EUROPEAN ATOMIC ENERGY COMMUNITY

TITLE IV — PROVISIONS ON ENHANCED COOPERATION

Article 10 (repealed) ( 13 ) Articles 27a to 27e (replaced) Articles 40 to 40b (replaced) Articles 43 to 45 (replaced)

Article 20 ( 14 )

( 7 ) The current Article 9 TEU amended the Treaty establishing the European Coal and Steel Community. This latter expired on 23 July 2002. Article 9 is repealed and the number thereof is used to insert another provision.

( 8 ) — Paragraphs 1 and 2 replace, in substance, Article 189 TEC; — paragraphs 1 to 3 replace, in substance, paragraphs 1 to 3 of Article 190 TEC; — paragraph 1 replaces, in substance, the first subparagraph of Article 192 TEC; — paragraph 4 replaces, in substance, the first subparagraph of Article 197 TEC.

( 9 ) Replaces, in substance, Article 4. ( 10 ) — Paragraph 1 replaces, in substance, the first and second indents of Article 202 TEC;

— paragraphs 2 and 9 replace, in substance, Article 203 TEC; — paragraphs 4 and 5 replace, in substance, paragraphs 2 and 4 of Article 205 TEC.

( 11 ) — Paragraph 1 replaces, in substance, Article 211 TEC; — paragraphs 3 and 7 replace, in substance, Article 214 TEC. — paragraph 6 replaces, in substance, paragraphs 1, 3 and 4 of Article 217 TEC.

( 12 ) — Replaces, in substance, Article 220 TEC. — the first subparagraph of paragraph 2 replaces, in substance, the first subparagraph of Article 221

TEC. ( 13 ) The current Article 10 TEU amended the Treaty establishing the European Atomic Energy Community.

Those amendments are incorporated into the Treaty of Lisbon. Article 10 is repealed and the number thereof is used to insert another provision.

( 14 ) Also replaces Articles 11 and 11a TEC.

EN C 83/362 Official Journal of the European Union 30.3.2010



TITLE V — PROVISIONS ON A COMMON FOREIGN AND SECURITY POLICY

TITLE V — GENERAL PROVISIONS ON THE UNION’S EXTERNAL ACTION AND SPECIFIC PROVISIONS ON THE COMMON FOREIGN AND SECURITY POLICY

Chapter 1 — General provisions on the Union’s external action

Article 21

Article 22

Chapter 2 — Specific provisions on the common foreign and security policy

Section 1 — Common provisions

Article 23

Article 11 Article 24



Article 27



Article 22 (moved) Article 30















Article 39


Article 26 (repealed)


Article 27a (replaced) ( 15 ) Article 20

Article 27b (replaced) ( 15 ) Article 20

Article 27c (replaced) ( 15 ) Article 20

Article 27d (replaced) ( 15 ) Article 20

Article 27e (replaced) ( 15 ) Article 20


Section 2 — Provisions on the common security and defence policy


Article 43

Article 44

Article 45

Article 46

TITLE VI — PROVISIONS ON POLICE AND JUDICIAL COOPERATION IN CRIMINAL MATTERS (repealed) ( 16 )

Article 29 (replaced) ( 17 )



( 15 ) The current Articles 27a to 27e, on enhanced cooperation, are also replaced by Articles 326 to 334 TFEU.

( 16 ) The current provisions of Title VI of the TEU, on police and judicial cooperation in criminal matters, are replaced by the provisions of Chapters 1, 4 and 5 of Title IV (renumbered V) of Part Three of the TFEU.

( 17 ) Replaced by Article 67 TFEU. ( 18 ) Replaced by Articles 87 and 88 TFEU. ( 19 ) Replaced by Articles 82, 83 and 85 TFEU.












Article 40 (replaced) ( 23 ) Article 20

Article 40 A (replaced) ( 23 ) Article 20

Article 40 B (replaced) ( 23 ) Article 20



TITLE VII — PROVISIONS ON ENHANCED COOPERATION (replaced) ( 24 )

TITLE IV — PROVISIONS ON ENHANCED COOPERATION



Article 43 B (replaced) ( 24 ) Article 20




TITRE VIII — FINAL PROVISIONS TITLE VI — FINAL PROVISIONS


Article 47

( 20 ) Replaced by Article 89 TFEU. ( 21 ) Replaced by Article 72 TFEU. ( 22 ) Replaced by Article 71 TFEU. ( 23 ) The current Articles 40 to 40 B TEU, on enhanced cooperation, are also replaced by Articles 326 to

334 TFEU. ( 24 ) The current Articles 43 to 45 and Title VII of the TEU, on enhanced cooperation, are also replaced by

Articles 326 to 334 TFEU.




Article 47 (replaced) Article 40



Article 50

Article 51

Article 52





Treaty on the Functioning of the European Union

Old numbering of the Treaty establishing the European Community

New numbering of the Treaty on the Functioning of the European Union

PART ONE — PRINCIPLES PART ONE — PRINCIPLES


Article 1


Title I — Categories and areas of union competence

Article 2

Article 3

Article 4

Article 5

Article 6

Title II — Provisions having general application

( 25 ) Replaced, in substance, by Article 3 TEU.




Article 7

Article 3, paragraph 1 (repealed) ( 26 )

Article 3, paragraph 2 Article 8



Article 9

Article 10


Article 153, paragraph 2 (moved) Article 12

Article 13 ( 28 )





Article 11 (replaced) ( 32 ) Articles 326 to 334

Article 11a (replaced) ( 32 ) Articles 326 to 334








( 26 ) Replaced, in substance, by Articles 3 to 6 TFEU. ( 27 ) Replaced by Article 5 TEU. ( 28 ) Insertion of the operative part of the protocol on protection and welfare of animals. ( 29 ) Replaced, in substance, by Article 13 TEU. ( 30 ) Replaced, in substance, by Article 13 TEU and Article 282, paragraph 1, TFEU. ( 31 ) Replaced, in substance, by Article 4, paragraph 3, TEU. ( 32 ) Also replaced by Article 20 TEU.




Article 17

PART TWO — CITIZENSHIP OF THE UNION PART TWO — NON-DISCRIMINATION AND CITIZENSHIP OF THE UNION









PART THREE — COMMUNITY POLICIES PART THREE — POLICIES AND INTERNAL ACTIONS OF THE UNION

Title I — The internal market



Title I — Free movement of goods Title II — Free movement of goods



Chapter 1 — The customs union Chapter 1 — The customs union




Part Three, Title X, Customs cooperation (moved) Chapter 2 — Customs cooperation


Chapter 2 — Prohibition of quantitative restrictions between Member States

Chapter 3 — Prohibition of quantitative restrictions between Member States








Title II — Agriculture Title III — Agriculture and fisheries








Title III — Free movement of persons, services and capital

Title IV — Free movement of persons, services and capital

Chapter 1 — Workers Chapter 1 — Workers





Chapter 2 — Right of establishment Chapter 2 — Right of establishment








Chapter 3 — Services Chapter 3 — Services











Chapter 4 — Capital and payments Chapter 4 — Capital and payments






Title IV — Visas, asylum, immigration and other policies related to free movement of persons

Title V — Area of freedom, security and justice

Chapter 1 — General provisions

Article 61 Article 67 ( 33 )

Article 68

Article 69

Article 70

Article 71 ( 34 )

Article 64, paragraph 1 (replaced) Article 72 ( 35 )

Article 73



Article 76

( 33 ) Also replaces the current Article 29 TEU. ( 34 ) Replaces the current Article 36 TEU. ( 35 ) Also replaces the current Article 33 TEU.




Chapter 2 — Policies on border checks, asylum and immigration


Article 63, points 1 et 2, and Article 64, paragraph 2 ( 36 )

Article 78

Article 63, points 3 and 4 Article 79

Article 80

Article 64, paragraph 1 (replaced) Article 72

Chapter 3 — Judicial cooperation in civil matters






Chapter 4 — Judicial cooperation in criminal matters

Article 82 ( 37 )

Article 83 ( 37 )

Article 84

Article 85 ( 37 )

Article 86

Chapter 5 — Police cooperation

Article 87 ( 38 )

Article 88 ( 38 )

Article 89 ( 39 )

( 36 ) Points 1 and 2 of Article 63 EC are replaced by paragraphs 1 and 2 of Article 78 TFEU, and paragraph 2 of Article 64 is replaced by paragraph 3 of Article 78 TFEU.

( 37 ) Replaces the current Article 31 TEU. ( 38 ) Replaces the current Article 30 TEU. ( 39 ) Replaces the current Article 32 TEU.




Title V — Transport Title VI — Transport












Title VI — Common rules on competition, taxation and approximation of laws

Title VII — Common rules on competition, taxation and approximation of laws

Chapter 1 — Rules on competition Chapter 1 — Rules on competition

Section 1 — Rules applying to undertakings Section 1 — Rules applying to undertakings







Section 2 — Aids granted by States Section 2 — Aids granted by States




Chapter 2 — Tax provisions Chapter 2 — Tax provisions








Chapter 3 — Approximation of laws Chapter 3 — Approximation of laws





Article 118

Title VII — Economic and monetary policy Title VIII — Economic and monetary policy


Chapter 1 — Economic policy Chapter 1 — Economic policy








Chapter 2 — monetary policy Chapter 2 — monetary policy










Article 111, paragraphs 1 to 3 and 5 (moved) Article 219


Article 133

Chapter 3 — Institutional provisions Chapter 3 — Institutional provisions





Chapter 4 — Provisions specific to Member States whose currency is the euro

Article 136

Article 137


Chapter 4 — Transitional provisions Chapter 5 — Transitional provisions


Article 139

Article 117, paragraphs 1, 2, sixth indent, and 3 to 9 (repealed)

Article 117, paragraph 2, first five indents (moved)

Article 141, paragraph 2

Article 121, paragraph 1 (moved) Article 122, paragraph 2, second sentence (moved) Article 123, paragraph 5 (moved)

Article 140 ( 40 )


Article 123, paragraph 3 (moved) Article 117, paragraph 2, first five indents (moved)

Article 141 ( 41 )

( 40 ) — Article 140, paragraph 1 takes over the wording of paragraph 1 of Article 121. — Article 140, paragraph 2 takes over the second sentence of paragraph 2 of Article 122. — Article 140, paragraph 3 takes over paragraph 5 of Article 123.

( 41 ) — Article 141, paragraph 1 takes over paragraph 3 of Article 123. — Article 141, paragraph 2 takes over the first five indents of paragraph 2 of Article 117.







Article 121, paragraph 1 (moved) Article 140, paragraph 1

Article 121, paragraphs 2 to 4 (repealed)

Article 122, paragraphs 1, 2, first sentence, 3, 4, 5 and 6 (repealed)

Article 122, paragraph 2, second sentence (moved)

Article 140, paragraph 2, first subparagraph

Article 123, paragraphs 1, 2 and 4 (repealed)




Article 124, paragraph 2 (repealed)

Title VIII — Employment Title IX — Employment







Title IX — Common commercial policy (moved)

Part Five, Title II, common commercial policy





Title X — Customs cooperation (moved) Part Three, Title II, Chapter 2, Customs cooperation





Title XI — Social policy, education, vocational training and youth

Title X — Social policy

Chapter 1 — social provisions (repealed)


Article 152










Chapter 2 — The European Social Fund Title XI — The European Social Fund




Chapter 3 — Education, vocational training and youth

Title XII — Education, vocational training, youth and sport



Title XII — Culture Title XIII — Culture


Title XIII — Public health Title XIV — Public health


Title XIV — Consumer protection Title XV — Consumer protection




Article 153, paragraphs 1, 3, 4 and 5 Article 169


Title XV — Trans–European networks Title XVI — Trans–European networks




Title XVI — Industry Title XVII — Industry


Title XVII — Economic and social cohesion Title XVIII — Economic, social and territorial cohesion






Title XVIII — Research and technological development

Title XIX — Research and technological development and space











Article 189





Title XIX — Environment Title XX — Environment




Titre XXI — Energy

Article 194

Title XXII — Tourism

Article 195

Title XXIII — Civil protection

Article 196

Title XXIV — Administrative cooperation

Article 197

Title XX — Development cooperation (moved) Part Five, Title III, Chapter 1, Development cooperation






Title XXI — Economic, financial and technical cooperation with third countries (moved)

Part Five, Title III, Chapter 2, Economic, financial and technical cooperation with third countries

Article 181a (moved) Article 212

PART FOUR — ASSOCIATION OF THE OVERSEAS COUNTRIES AND TERRITORIES

PART FOUR — ASSOCIATION OF THE OVERSEAS COUNTRIES AND TERRITORIES



( 42 ) Replaced, in substance, by the second sentence of the second subparagraph of paragraph 1 of Article 208 TFEU.









PART FIVE — THE UNION’S EXTERNAL ACTION

Title I — General provisions on the Union’s external action

Article 205

Part Three, Title IX, Common commercial policy (moved)

Title II — Common commercial policy



Title III — Cooperation with third countries and humanitarian aid

Part Three, Title XX, Development cooperation (moved)

Chapter 1 — development cooperation

Article 177 (moved) Article 208 ( 43 )




Part Three, Title XXI, Economic, financial and technical cooperation with third countries (moved)

Chapter 2 — Economic, financial and technical cooperation with third countries

Article 181a (moved) Article 212

Article 213

Chapter 3 — Humanitarian aid

Article 214

Title IV — Restrictive measures

( 43 ) The second sentence of the second subparagraph of paragraph 1 replaces, in substance, Article 178 TEC.





Title V — International agreements

Article 216



Article 111, paragraphs 1 to 3 and 5 (moved) Article 219

Title VI — The Union’s relations with international organisations and third countries and the Union delegations

Articles 302 to 304 (replaced) Article 220

Article 221

Title VII — Solidarity clause

Article 222

PART FIVE — INSTITUTIONS OF THE COMMUNITY

PART SIX — INSTITUTIONAL AND FINANCIAL PROVISIONS

Title I — Institutional provisions Title I — Institutional provisions

Chapter 1 — The institutions Chapter 1 — The institutions

Section 1 — The European Parliament Section 1 — The European Parliament


Article 190, paragraphs 1 to 3 (repealed) ( 45 )

Article 190, paragraphs 4 and 5 Article 223

Article 191, first paragraph (repealed) ( 46 )

Article 191, second paragraph Article 224


Article 192, second paragraph Article 225


( 44 ) Replaced, in substance, by Article 14, paragraphs 1 and 2, TEU. ( 45 ) Replaced, in substance, by Article 14, paragraphs 1 to 3, TEU. ( 46 ) Replaced, in substance, by Article 11, paragraph 4, TEU. ( 47 ) Replaced, in substance, by Article 14, paragraph 1, TEU.








Article 197, second, third and fourth paragraphs

Article 230





Section 2 — The European Council

Article 235

Article 236

Section 2 — The Council Section 3 — The Council




Article 205, paragraphs 2 and 4 (repealed) ( 51 )

Article 205, paragraphs 1 and 3 Article 238






Section 3 — The Commission Section 4 — The Commission

( 48 ) Replaced, in substance, by Article 14, paragraph 4, TEU. ( 49 ) Replaced, in substance, by Article 16, paragraph 1, TEU and by Articles 290 and 291 TFEU. ( 50 ) Replaced, in substance, by Article 16, paragraphs 2 and 9 TEU. ( 51 ) Replaced, in substance, by Article 16, paragraphs 4 and 5 TEU.





Article 244

Article 212 (moved) Article 249, paragraph 2





Article 217, paragraphs 1, 3 and 4 (repealed) ( 54 )





Section 4 — The Court of Justice Section 5 — The Court of Justice of the European Union



Article 221, second and third paragraphs Article 251



Article 224 ( 58 ) Article 254

Article 255


Article 225a Article 257

( 52 ) Replaced, in substance, by Article 17, paragraph 1 TEU. ( 53 ) Replaced, in substance, by Article 17, paragraphs 3 and 7 TEU. ( 54 ) Replaced, in substance, by Article 17, paragraph 6, TEU. ( 55 ) Replaced, in substance, by Article 295 TFEU. ( 56 ) Replaced, in substance, by Article 19 TEU. ( 57 ) Replaced, in substance, by Article 19, paragraph 2, first subparagraph, of the TEU. ( 58 ) The first sentence of the first subparagraph is replaced, in substance, by Article 19, paragraph 2,

second subparagraph of the TEU.








Article 229a Article 262







Article 269






Article 275

Article 276






Section 6 — The European Central Bank

Article 282






Section 5 — The Court of Auditors Section 7 — The Court of Auditors




Chapter 2 — Provisions common to several institutions

Chapter 2 — Legal acts of the Union, adoption procedures and other provisions

Section 1 — The legal acts of the Union


Article 289

Article 290 ( 59 )

Article 291 ( 59 )

Article 292

Section 2 — Procedures for the adoption of acts and other provisions




Article 295



Article 298



Chapter 3 — The Union’s advisory bodies

Article 300

Chapter 3 — The Economic and Social Committee

Section 1 — The Economic and Social Committee

( 59 ) Replaces, in substance, the third indent of Article 202 TEC.





Article 258, first, second and fourth paragraphs Article 301

Article 258, third paragraph (repealed) ( 61 )





Chapter 4 — The Committee of the Regions Section 2 — The Committee of the Regions

Article 263, first and fifth paragraphs (repealed) ( 62 )

Article 263, second to fourth paragraphs Article 305



Chapter 5 — The European Investment Bank Chapter 4 — The European Investment Bank



Title II — Financial provisions Title II — Financial provisions


Chapter 1 — The Union’s own resources



Chapter 2 — The multiannual financial framework

Article 312

Chapter 3 — The Union’s annual budget

( 60 ) Replaced, in substance, by Article 300, paragraph 2 of the TFEU. ( 61 ) Replaced, in substance, by Article 300, paragraph 4 of the TFEU. ( 62 ) Replaced, in substance, by Article 300, paragraphs 3 and 4, TFEU. ( 63 ) Replaced, in substance, by Article 310, paragraph 4, TFEU.







Article 272, paragraphs 2 to 10 Article 314



Chapter 4 — Implementation of the budget and discharge




Chapter 5 — Common provisions




Article 323

Article 324

Chapter 6 — Combating fraud


Title III — Enhanced cooperation

Articles 11 and 11a (replaced) Article 326 ( 64 )







( 64 ) Also replaces the current Articles 27a to 27e, 40 to 40b, and 43 to 45 TEU.






PART SIX — GENERAL AND FINAL PROVISIONS

PART SEVEN — GENERAL AND FINAL PROVISIONS




















Article 299, paragraph 2, second, third and fourth subparagraphs

Article 349

Article 299, paragraph 2, first subparagraph, and paragraphs 3 to 6 (moved)

Article 355

( 64 ) Also replaces the current Articles 27a to 27e, 40 to 40b, and 43 to 45 TEU. ( 65 ) Replaced, in substance, by Article 47 TEU. ( 66 ) Replaced, in substance by Article 52 TEU.













Article 353




Article 299, paragraph 2,first subparagraph, and paragraphs 3 to 6 (moved)

Article 355


Final Provisions


Article 358


( 67 ) Replaced, in substance by Article 51 TEU. ( 68 ) Replaced, in substance by Article 55 TEU.


Comment formWe welcome any comments you may have on the learning materials that are sent to you. Such feedback helps us to improve the materials produced for the International Programmes.

If you have any comments about this subject guide – either general or specific (including corrections, non-availability of supporting materials, etc.), please take the time to complete and return this form.

Title of this subject guide:

Name:

Address:

Student number:

Email:

Qualification for which you are studying:

Comments:

Please continue on additional sheets if necessary.

Please send your comments on this form (or a photocopy of it) to:

Undergraduate Laws Programme Office, University of London, Stewart House, 32 Russell Square, London WC1B 5DNOr, you can email your comments to: [email protected]

Documents

European Law (UK)