European Union Law [3 ed.] 9780993336591

Table of contents :
EUROPEAN UNION LAW
Preface
Contents
Table of Cases
Table of Legislation
Tables of Equivalences
Abbreviations
THE FOUNDATIONS OF THE EUROPEAN UNION
Creation of the European Community and European Union
Introduction
Motives for European integration
The creation of international (European) organisations
Widening participation
Deepening cooperation
The UK’s attitude towards the European Union
Further reading
The Institutional Framework of the European Union
Introduction
Democracy and separation of powers within the European Union
Democracy in the EU
The separation of powers in the EU
The political institutions of the European Union
The Commission
Constitution and appointment of the Commission
Role of the Commission
The Council
Configuration of the Council
Function of the Council
Council voting procedures
The European Parliament
Composition of the European Parliament
Functions of the European Parliament
Legislative powers
Budgetary powers
Control of the ‘Executive’
Right to litigate
Additional functions
The European Council
The European Court of Auditors
The Monetary Union institutions: the European Central Bank and the European System of Central Banks
The Union’s advisory bodies
Further reading
Division of Competences between the Union and the Member States
Introduction
Powers
Principle of conferral
Implied powers
Residual powers
Union competences
Exclusive competences
Shared competences
Supportive competences
The enhanced cooperation procedure
Limits to competences
Principle of subsidiarity
Principle of proportionality
Further reading
The Sources of European Law
Introduction
Primary sources
Secondary sources
Legislative and non-legislative acts
Legislative acts
Non-legislative acts
Validity of EU acts
Article 288 TFEU
Binding EU acts: regulations, directives and decisions
Regulations
Directives
Decisions
Non-binding EU acts: recommendations and opinions
Other acts
Other binding acts outside Article 288 TEU
Soft law
Case law of the Court of Justice of the European Union
General principles of EU law
Fundamental rights: the Charter of Fundamental Rights of the European Union and the European Convention on Human Rights
Charter of Fundamental Rights of the European Union
European Convention on Human Rights
International agreements
Further reading
The Law-making Process in the European Union
Introduction
The principles of law-making
Principles relating to the institutions
Principles relating to content and procedure
The legislative procedures
The ordinary legislative procedure
The special legislative procedure
The adoption of regulatory acts
Further reading
THE RELATIONSHIP BETWEEN EU LAW AND NATIONAL LAWS
The Constitutional Pillars of European Union Law
Introduction
Supremacy of EU law
Rationale for the principle of supremacy
The creation and development of the principle of supremacy by the CJEU
Application of the principle of supremacy
Principle of disapplication of national law
Principle that national law must be interpreted in light of EU law
Principle of State liability in relation to the principle of supremacy
The reaction of national constitutional courts to the principle of supremacy
The principle of supremacy in EU legal instruments and documents
Direct effect
The principle of direct effect
Direct effect of Treaty provisions
Direct effect of EU acts
Direct effect of regulations
Direct effect of directives
Direct effect of decisions
Direct effect of international agreements
Circumventing the lack of horizontal direct effect of directives: indirect effect, triangular situations, incidental effect and the fundamental rights approach
Indirect effect
Triangular situations
Incidental effect
The general principles approach
Further reading
The Effectiveness of European Union law
Introduction
Enforcement actions against Member States under Articles 258 to 260 TFEU
The procedure
The pre-judicial (administrative) phase
Informal phase
Formal phase
Reasoned opinion
The judicial phase
The procedure(s)
Defences
Interim measures
Effect of the Court’s ruling
Financial penalties
Member State liability for breaches of EU law
Background to and rationale of the principle
Author of the violation: definition of a State
Development of the principle
Procedural autonomy and domestic responsibilities
Further reading
THE EUROPEAN JUDICIARY
The Court of Justice of the European Union
Introduction
The Court of Justice
The aims and roles of the Court of Justice
The procedure
Judicial proceedings
Orders and Opinions
The General Court
Specialised courts
Methods of interpretation
The CJEU as a constitutional court and judicial activism
Further reading
Preliminary Ruling Procedure on Interpretation and Validity
Introduction
Jurisdiction of the Court of Justice of the European Union and division of tasks
Jurisdiction of the Court of Justice of the European Union
Division of tasks
Which ‘national court or tribunal’ can make a reference?
Obligation and discretion to refer
Can the Court of Justice of the European Union refuse to hear a preliminary reference?
The special preliminary ruling procedures
The effects of the ruling of the Court of Justice of the European Union
Further reading
Judicial Supervision of European Union Institutions
Introduction
Annulment of EU acts
Reviewable acts
Grounds of review
Lack of competence
Infringement of an essential procedural requirement
Infringement of the Treaty or of any rule of law relating to its application
Misuse of powers
Extent of judicial review
Time limits
Locus standi – who may seek annulment of an EU act?
Privileged applicants
Semi-privileged applicants
Non-privileged applicants
Effect of annulment
Failure to act
Plea of illegality
Extra-contractual liability
Admissibility of the action
Requirements for a right to damages
Further reading
TRADE WITHIN THE INTERNAL MARKET
The Internal Market and Harmonisation
Introduction
From the common market to the internal market
The road to the Single European Act
The Single European Act and the internal market
Common market and internal market
The internal market: a gradual process of creation
The internal market after the first 10 years
The internal market of the 21st century
Harmonisation
The legal basis of harmonisation
Harmonisation, approximation or coordination?
Methods of harmonisation
Original methods of harmonisation
The new approach and the global approach
Further reading
The Free Movement of Goods: The Customs Union and the Abolition of Tariff Barriers
Introduction
The Customs Union
The creation of the Customs Union
The Union Customs Code
The internal and external aspects of the Customs Union
The definition of ‘goods’
The elimination of tariff barriers
The abolition of customs duties
Charges having equivalent effect to customs duties
The nature of the charge
The origin of the charge
The tax point of the charge
Permissible charges
Charges as fees for services rendered by the Member State
The service must be effective and genuine
The service is for the sole benefit of the trader
The charge must be proportionate to the actual cost of the service
Charges attached to inspections required under EU law
Charges imposed on domestic goods only
Charges imposed on domestic and imported goods
The prohibition of discriminatory internal taxation
‘Genuine tax’
Application of Article 110 TFEU
‘Similar products’
‘Products in competition’
Direct and indirect discrimination
Direct discrimination
Indirect discrimination
Further reading
The Free Movement of Goods: The Abolition of Non-tariff Barriers
Introduction
The prohibition of physical and technical barriers
Measures caught under Articles 34 and 35 TFEU
National measures
‘Purely internal measures’
EU measures
Quantitative restrictions
Measures having equivalent effect to quantitative restrictions on imports
The Dassonville formula
The Cassis de Dijon approach
The ruling
The principle of mutual recognition or equivalence
The economic significance of Cassis de Dijon
Examples of measures having equivalent effect
Distinctly applicable measures
Indistinctly applicable measures
Marketing restrictions: chronicle of a jurisprudence foretold
Review of the scope of application of Article 34 TFEU: Keck and Mithouard
Examples of national measures governing ‘certain selling arrangements’
The limits of the Keck and Mithouard approach
Quantitative restrictions and measures having equivalent effect on exports
Further reading
The Free Movement of Goods: Derogations and Justifications
Introduction
Treaty derogations
Derogations under Article 36 TFEU
General considerations
Scope of application of Article 36 TFEU
Conditions of application of Article 36 TFEU
Grounds for justification
Public morality, public policy and public security
Protection of health and life of humans, animals and plants
Protection of industrial and commercial property
Derogations under Article 114 TFEU
Justifications in the case law of the Court of Justice
The first Cassis de Dijon principle
Legal basis of ‘mandatory requirements’
Relationship between the first Cassis de Dijon principle and Article 36 TFEU
‘Mandatory requirements’
Principles of law
The precautionary principle
Protection of fundamental rights
Further reading
Freedom to Exercise an Economic Activity
Introduction
Free movement of workers
The concept of worker
A European law concept
Work seekers
The worker’s rights
Freedom of establishment and freedom to provide services
The concept of establishment
The concept of services
The beneficiaries of the freedom of establishment and the freedom to provide services
Natural persons
Legal persons
The Services Directive
Scope of application of the Directive
Freedom of establishment for providers
Free provision of services
Cooperation between Member States
The principle of non-discrimination
Prohibition of direct and indirect discrimination
Non-discrimination and access to an economic activity
Non-discrimination and pursuit of an economic activity
Prohibition of non-discriminatory restrictions
Mutual recognition of professional qualifications
The original legislative movement
The health professions
Architects
The legal profession
The new approach to harmonisation
The first wave of legislation
Consolidation under Directive 2005/36
Modernisation of Directive 2005/36
Activities falling outside the scope of those freedoms
Public service
Exercise of official authority
Further reading
COMPETITION LAW
Core Concepts of Competition Law
Introduction
The concept of ‘undertaking’
Irrelevance of the form or legal status
The economic nature of the activity
Specific sectors of activities
The liberal professions
Insurance, pension and social security funds
Single economic entity
Market definition
The importance of the concept of relevant market
Purpose of market definition
Definition of relevant market
The relevant product market
The relevant geographic market
The relevant temporal market
The concept of ‘effect on trade between the Member States’
The purpose of the concept
Definition and interpretation of the concept
Appreciability
The applicability of the concept to agreements or abuses covering one, or part of a, single Member State
Further reading
Substantive Competition Rules Applicable to Undertakings
Introduction
Control of horizontal and vertical restraints under Article 101 TFEU
The general economy of Article 101(1) TFEU
The constituent elements of Article 101(1) TFEU
The different forms of collusion
Joint intention
Decision by associations of undertakings
Concerted practice
Interference with competition
The object or effect of the agreement or practice
The prevention, restriction or distortion of competition
Article 101(1) TFEU applies to horizontal and vertical agreements alike
Horizontal agreements
Vertical agreements
The nullity of a restrictive agreement under Article 101(2) TFEU
Exemptions under Article 101(3) TFEU
The general economy of Article 101(3) TFEU
Objective benefits
Fair share for consumers
No indispensable restrictions
No substantial elimination of competition
Block exemptions
Abuse of dominant position
Market power
Dominance in a substantial part of the internal market
Abuse
Concept of abuse
Types of abuse
Objective justification of an abuse
Concentrations
Definition of a concentration
The Union dimension of concentrations
Appraisal of concentrations
Further Reading
Article 101 TFEU
Article 102 TFEU
Control of concentrations
Enforcement of Competition Rules
Introduction
The territoriality principle in EU competition law
Public enforcement of competition rules
The modernisation of European competition law
The enforcement of Articles 101 and 102 TFEU
The role of the Commission
Investigation by the Commission
Commission decisions
Penalties
Cooperation between the Commission and national competition authorities and courts
Cooperation between the Commission and national competition authorities
Cooperation between the Commission and national courts
Review of public enforcement under Regulation 1/2003
Private enforcement of competition rules
Private enforcement in the national courts
The new EU regime governing actions for damages under national law for breaches of competition law
Aims and objectives of the Directive
Key provisions of the Directive
Right to full compensation
Proof of a breach of competition rules
Limitation periods
Joint and several liability
Disclosure of evidence
Passing-on defence
Quantification of harm
Consensual dispute resolution
Temporal application of the Directive
Further reading
EUROPEAN CITIZENSHIP AND THE FREE MOVEMENT OF EUROPEAN CITIZENS
European Citizenship
Introduction
From a People’s Europe to European citizenship
People’s Europe and citizens’ Europe
European citizenship under the EU treaties
European citizenship and national citizenship
The status of European citizens
Citizenship as the fundamental status of EU nationals
The political rights of European citizens
The right to vote and to stand at European and municipal elections
The European citizens’ initiative
The legal protective rights of European citizens
The right to diplomatic and consular protection
The right to petition the European Parliament
The right to complain to the European Ombudsman
The right to use any EU official language in correspondence with EU institutions and bodies
Further reading
The Free Movement of European Citizens
Introduction
Free movement within the area of freedom, security and justice
Genesis of the area of freedom, security and justice
The area of freedom, security and justice under the Lisbon Treaty
European Union migrants and family members’ right to free movement and residence
Economically active and inactive EU migrants
Migrants’ family members
Right to move and reside in another Member State
The right to move freely
The right of exit
The right of entry
The right of residence
The right of residence for up to three months
The right of residence for more than three months
The right of permanent residence
Equal treatment rights
Limits to free movement rights
Conditions of application
Grounds for justification
Public policy and public security
Public health
Protection against restrictive measures
Protection against expulsion
Normal protection
Enhanced protection
Procedural requirements and safeguards
Notification in writing
Access to judicial redress
Exclusion ban
Expulsion as a legal consequence of a custodial penalty
Further reading
Index

Citation preview

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EUROPEAN UNION LAW

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EUROPEAN UNION LAW Christian Dadomo and No¸lle Que´nivet THIRD EDITION

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Hall and Stott Publishing Ltd 27 Witney Close Saltford BS31 3DX © Christian Dadomo and Noëlle Quénivet 2020 The moral rights of the authors have been asserted All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without the prior written permission of the copyright holder, application for which should be addressed to the publisher, or as expressly permitted by law, by licence or under terms agreed with the appropriate reprographics rights organisation. Contains public sector information licensed under the Open Government Licence v3.0. EU material is © European Union, 1998–2020, source: http://eur-lex.europa.eu. British Library Cataloguing in Publication Data Data available ISBN 978 0 993336 59 1 Typeset by Style Photosetting Ltd, Mayfield, East Sussex

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PREFACE Between the publication of the first edition in 2015 and the publication of the current one, the Brexit saga started and unravelled and will continue for some time. It took the British Government nearly a year after the June 2016 referendum result to notify the EU of its intention to withdraw from the European Union under Article 50 TEU. The European Council then issued the Guidelines Following the United Kingdom’s Notification under Article 50 TEU on 29 April 2017 which formed the basis for the negotiation discussions. The negotiations on the UK withdrawal culminated, after months of difficult, complex, protracted negotiations and many political and constitutional peripeteia, with the entry into force of the final version of the Withdrawal Agreement on 1 February 2020 and the UK officially leaving the EU on 31 January 2020. The coming into force of the Withdrawal Agreement was followed by the opening of negotiations with the United Kingdom for a New Partnership Agreement. At the time of writing, these negotiations are still ongoing, and doubt has been cast as to their conclusion before the end of the transitional period on 31 December 2020. However, whether the future relationship between the UK and the EU following the withdrawal is finalised or not, EU law will still play a major role in UK law, albeit in a subliminal way, and therefore a solid understanding of EU law would still be warranted for current or future British lawyers advising their clients on EU internal market regulations. Brexit should not distract us from the latest key developments in EU law which have been incorporated in this third edition. These include, among others, the impact of the Smith and Poplawski cases on primacy of EU law and its relationship with direct effect; the reaction of Supreme constitutional courts (including the Ajos case of the Danish Supreme Court and the ECB case of the German Federal Constitutional Court); the new 2019 Regulation on the European Citizens’ Initiative and the latest cases; the latest developments regarding the roadmap on the completion of the economic and monetary union, the single market and the principle of mutual recognition; the recent case law of the CJEU on European citizenship (including Coman, Tjebbes, Chenchooliah, Banger, Lounes, Diallo, Vomero and TopFit) and in the field of competition law (including the ODD Drive cartel, Intel, Icap, Skanska cases). This book is the result of years of teaching collaboration in European Union law between Christian Dadomo, Senior Lecturer, and Noëlle Quénivet, Associate Professor in International Law, at the University of the West of England at Bristol. It covers the relevant legal areas in a concise, yet not oversimplifying, manner and includes a growing amount of information, such as cases and practical examples, diagrams and flowcharts which were introduced, following discussion with our students, to clarify or dissect certain points of the law or explain a procedure in a chronological manner.

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It will be of great use for all undergraduate or postgraduate students in the UK, Europe and beyond, discovering or rediscovering EU law and its intricacies. Regular updates on all EU law and policy matters are also provided through social media accounts curated by the authors: https://twitter.com/EULawPol57 https://eulawpol57.wordpress.com/ Christian Dadomo Noëlle Quénivet University of the West of England at Bristol August 2020

Contents

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CONTENTS Preface Table of Cases Table of Legislation Tables of Equivalences Abbreviations

PART I THE FOUNDATIONS OF THE EUROPEAN UNION 1

Creation of the European Community and European Union

v xv xlv lix lxv

1 3

1.1 Introduction 1.2 Motives for European integration 1.3 The creation of international (European) organisations 1.4 Widening participation 1.5 Deepening cooperation 1.6 The UK’s attitude towards the European Union 1.7 Further reading Summary Test Your Knowledge

3 3 4 5 7 13 15 16 16

2

The Institutional Framework of the European Union

17

Introduction Democracy and separation of powers within the European Union 2.2.1 Democracy in the EU 2.2.2 The separation of powers in the EU 2.3 The political institutions of the European Union 2.3.1 The Commission 2.3.2 The Council 2.3.3 The European Parliament 2.3.4 The European Council 2.4 The European Court of Auditors 2.5 The Monetary Union institutions: the European Central Bank and the European System of Central Banks 2.6 The Union’s advisory bodies 2.7 Further reading Summary Test Your Knowledge

17 17 17 18 19 19 23 26 28 29

2.1 2.2

29 29 30 31 31

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Division of Competences between the Union and the Member States 33

3.1 3.2

Introduction Powers 3.2.1 Principle of conferral 3.2.2 Implied powers 3.2.3 Residual powers 3.3 Union competences 3.3.1 Exclusive competences 3.3.2 Shared competences 3.3.3 Supportive competences 3.3.4 The enhanced cooperation procedure 3.4 Limits to competences 3.4.1 Principle of subsidiarity 3.4.2 Principle of proportionality 3.5 Further reading Summary Test Your Knowledge

33 33 33 34 34 35 36 36 36 36 37 37 40 41 42 42

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The Sources of European Law

4.1 4.2 4.3

Introduction Primary sources Secondary sources 4.3.1 Legislative and non-legislative acts 4.3.2 Validity of EU acts 4.3.3 Article 288 TFEU 4.3.4 Other acts 4.4 Case law of the Court of Justice of the European Union 4.5 General principles of EU law 4.6 Fundamental rights: the Charter of Fundamental Rights of the European Union and the European Convention on Human Rights 4.6.1 Charter of Fundamental Rights of the European Union 4.6.2 European Convention on Human Rights 4.7 International agreements 4.8 Further reading Summary Test Your Knowledge

43 44 47 48 50 51 54 56 56

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5.1 5.2

The Law-making Process in the European Union

Introduction The principles of law-making 5.2.1 Principles relating to the institutions 5.2.2 Principles relating to content and procedure 5.3 The legislative procedures 5.3.1 The ordinary legislative procedure 5.3.2 The special legislative procedure 5.4 The adoption of regulatory acts 5.5 Further reading Summary Test Your Knowledge

57 57 59 59 60 61 61 63 63 63 65 66 67 68 69 70 71 71

Contents

PART II THE RELATIONSHIP BETWEEN EU LAW AND NATIONAL LAWS 6

The Constitutional Pillars of European Union Law

6.1 6.2

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Introduction Supremacy of EU law 6.2.1 Rationale for the principle of supremacy 6.2.2 The creation and development of the principle of supremacy by the CJEU 6.2.3 Application of the principle of supremacy 6.2.4 The reaction of national constitutional courts to the principle of supremacy 6.2.5 The principle of supremacy in EU legal instruments and documents 6.3 Direct effect 6.3.1 The principle of direct effect 6.3.2 Direct effect of Treaty provisions 6.3.3 Direct effect of EU acts 6.3.4 Direct effect of international agreements 6.3.5 Circumventing the lack of horizontal direct effect of directives: indirect effect, triangular situations, incidental effect and the fundamental rights approach 6.4 Further reading Summary Test Your Knowledge

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The Effectiveness of European Union law

7.1 7.2

Introduction Enforcement actions against Member States under Articles 258 to 260 TFEU 7.2.1 The procedure 7.2.2 Financial penalties 7.3 Member State liability for breaches of EU law 7.3.1 Background to and rationale of the principle 7.3.2 Author of the violation: definition of a State 7.3.3 Development of the principle 7.3.4 Procedural autonomy and domestic responsibilities 7.4 Further reading Summary Test Your Knowledge

PART III THE EUROPEAN JUDICIARY

75 76 76 77 77 83 84 85 85 87 87 92

101 101 102 112 117 117 118 119 120 122 123 123

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The Court of Justice of the European Union

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8.1 8.2

Introduction The Court of Justice 8.2.1 The aims and roles of the Court of Justice 8.2.2 The procedure The General Court Specialised courts Methods of interpretation

127 128 129 131 134 135 135

8.3 8.4 8.5

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8.6 The CJEU as a constitutional court and judicial activism 8.7 Further reading Summary Test Your Knowledge

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Preliminary Ruling Procedure on Interpretation and Validity

9.1 9.2

Introduction Jurisdiction of the Court of Justice of the European Union and division of tasks 9.2.1 Jurisdiction of the Court of Justice of the European Union 9.2.2 Division of tasks 9.3 Which ‘national court or tribunal’ can make a reference? 9.4 Obligation and discretion to refer 9.5 Can the Court of Justice of the European Union refuse to hear a preliminary reference? 9.6 The special preliminary ruling procedures 9.7 The effects of the ruling of the Court of Justice of the European Union 9.8 Further reading Summary Test Your Knowledge

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Judicial Supervision of European Union Institutions

10.1 10.2

Introduction Annulment of EU acts 10.2.1 Reviewable acts 10.2.2 Grounds of review 10.2.3 Time limits 10.2.4 Locus standi – who may seek annulment of an EU act? 10.2.5 Effect of annulment 10.3 Failure to act 10.4 Plea of illegality 10.5 Extra-contractual liability 10.5.1 Admissibility of the action 10.5.2 Requirements for a right to damages 10.6 Further reading Summary Test Your Knowledge

PART IV TRADE WITHIN THE INTERNAL MARKET

143 145 145 147 149 150 155 158 159 161 162 162

163 163 163 163 166 171 173 182 183 186 187 188 190 196 197 197

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The Internal Market and Harmonisation

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11.1 11.2

Introduction From the common market to the internal market 11.2.1 The road to the Single European Act 11.2.2 The Single European Act and the internal market 11.2.3 The internal market of the 21st century Harmonisation 11.3.1 The legal basis of harmonisation

201 202 202 203 206 209 209

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11.3.2 Harmonisation, approximation or coordination? 11.3.3 Methods of harmonisation 11.4 Further reading Summary Test Your Knowledge

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The Free Movement of Goods: The Customs Union and the Abolition of Tariff Barriers

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Introduction The Customs Union 12.2.1 The creation of the Customs Union 12.2.2 The Union Customs Code 12.2.3 The internal and external aspects of the Customs Union 12.3 The definition of ‘goods’ 12.4 The elimination of tariff barriers 12.4.1 The abolition of customs duties 12.4.2 Charges having equivalent effect to customs duties 12.4.3 Permissible charges 12.4.4 The prohibition of discriminatory internal taxation 12.5 Further reading Summary Test Your Knowledge

223 224 224 225 225 226 226 227 228 230 234 243 243 244

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The Free Movement of Goods: The Abolition of Non-tariff Barriers

13.1 13.2

Introduction The prohibition of physical and technical barriers 13.2.1 Measures caught under Articles 34 and 35 TFEU 13.2.2 Quantitative restrictions 13.2.3 Measures having equivalent effect to quantitative restrictions on imports 13.2.4 Quantitative restrictions and measures having equivalent effect on exports 13.3 Further reading Summary Test Your Knowledge

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14.1 14.2

The Free Movement of Goods: Derogations and Justifications

Introduction Treaty derogations 14.2.1 Derogations under Article 36 TFEU 14.2.2 Derogations under Article 114 TFEU 14.3 Justifications in the case law of the Court of Justice 14.3.1 The first Cassis de Dijon principle 14.3.2 Principles of law 14.4 Further reading Summary Test Your Knowledge

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Freedom to Exercise an Economic Activity

15.1 15.2

Introduction Free movement of workers 15.2.1 The concept of worker 15.2.2 The worker’s rights 15.3 Freedom of establishment and freedom to provide services 15.3.1 The concept of establishment 15.3.2 The concept of services 15.3.3 The beneficiaries of the freedom of establishment and the freedom to provide services 15.3.4 The Services Directive 15.4 The principle of non-discrimination 15.4.1 Prohibition of direct and indirect discrimination 15.4.2 Non-discrimination and access to an economic activity 15.4.3 Non-discrimination and pursuit of an economic activity 15.4.4 Prohibition of non-discriminatory restrictions 15.5 Mutual recognition of professional qualifications 15.5.1 The original legislative movement 15.5.2 The new approach to harmonisation 15.6 Activities falling outside the scope of those freedoms 15.6.1 Public service 15.6.2 Exercise of official authority 15.7 Further reading Summary Test Your Knowledge

PART V COMPETITION LAW 16 16.1 16.2

Core Concepts of Competition Law

Introduction The concept of ‘undertaking’ 16.2.1 Irrelevance of the form or legal status 16.2.2 The economic nature of the activity 16.2.3 Specific sectors of activities 16.2.4 Single economic entity 16.3 Market definition 16.3.1 The importance of the concept of relevant market 16.3.2 Purpose of market definition 16.3.3 Definition of relevant market 16.4 The concept of ‘effect on trade between the Member States’ 16.4.1 The purpose of the concept 16.4.2 Definition and interpretation of the concept 16.4.3 Appreciability 16.4.4 The applicability of the concept to agreements or abuses covering one, or part of a, single Member State 16.5 Further reading Summary Test Your Knowledge

301 301 301 302 304 306 306 306 309 312 315 316 317 318 319 322 322 324 328 329 331 332 333 334

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Contents

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Substantive Competition Rules Applicable to Undertakings

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Introduction Control of horizontal and vertical restraints under Article 101 TFEU 17.2.1 The general economy of Article 101(1) TFEU 17.2.2 The constituent elements of Article 101(1) TFEU 17.2.3 Article 101(1) TFEU applies to horizontal and vertical agreements alike 17.2.4 The nullity of a restrictive agreement under Article 101(2) TFEU 17.2.5 Exemptions under Article 101(3) TFEU 17.3 Abuse of dominant position 17.3.1 Market power 17.3.2 Dominance in a substantial part of the internal market 17.3.3 Abuse 17.4 Concentrations 17.4.1 Definition of a concentration 17.4.2 The Union dimension of concentrations 17.4.3 Appraisal of concentrations 17.5 Further Reading Summary Test Your Knowledge

378 381 382 390 391 394 395 404 406 408 409 412 414 414

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Enforcement of Competition Rules

18.1 18.2 18.3

Introduction The territoriality principle in EU competition law Public enforcement of competition rules 18.3.1 The modernisation of European competition law 18.3.2 The enforcement of Articles 101 and 102 TFEU 18.4 Private enforcement of competition rules 18.4.1 Private enforcement in the national courts 18.4.2 The new EU regime governing actions for damages under national law for breaches of competition law 18.5 Further reading Summary Test Your Knowledge

PART VI EUROPEAN CITIZENSHIP AND THE FREE MOVEMENT OF EUROPEAN CITIZENS

363 364 364 364

417 418 420 420 421 432 433 435 441 442 443

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European Citizenship

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19.1 19.2

Introduction From a People’s Europe to European citizenship 19.2.1 People’s Europe and citizens’ Europe 19.2.2 European citizenship under the EU treaties 19.2.3 European citizenship and national citizenship The status of European citizens 19.3.1 Citizenship as the fundamental status of EU nationals 19.3.2 The political rights of European citizens 19.3.3 The legal protective rights of European citizens

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19.4 Further reading Summary Test Your Knowledge

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20.1 20.2

The Free Movement of European Citizens

Introduction Free movement within the area of freedom, security and justice 20.2.1 Genesis of the area of freedom, security and justice 20.2.2 The area of freedom, security and justice under the Lisbon Treaty 20.3 European Union migrants and family members’ right to free movement and residence 20.3.1 Economically active and inactive EU migrants 20.3.2 Migrants’ family members 20.3.3 Right to move and reside in another Member State 20.4 Equal treatment rights 20.5 Limits to free movement rights 20.5.1 Conditions of application 20.5.2 Grounds for justification 20.5.3 Protection against restrictive measures 20.6 Further reading Summary Test Your Knowledge Index

471 471 472 473 473 474 475 480 485 492 492 493 496 500 501 502 503

Table of Cases

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TABLE OF CASES Numerics 1998 Football World Cup [2000] OJ L5/55

400

A A Ahlström Osakeyhtiö and others v Commission (Re Wood Pulp Cartel) (Joined Cases C-89/85, C-104/85, C-114/85, C-116/85, C-117/85 and C-125/85 to C-129/85) [1993] ECR I-1307 364, 370, 371, 418, 419 A Racke GmbH & Co v Hauptzollamt Mainz (Case C-162/96) EU:C:1998:293 146 A/S Bevola and Jens W Trock ApS v Skatteministeriet (Case C-650/18) EU:C:2018:424 311 Aalberts Industries NV and Others v Commission (Case T-385/06) EU:T:2011:114 365 Aannemersbedrijf PK Kraaijeveld BV v eav Gedeputeerde Staten van Zuid-Holland (Case C-72/95) [1996] ECR I-5403 119 AB Volvo v Erik Veng (UK) Ltd (Case 238/87) [1988] ECR 6211 398 Abrahamsson and Anderson v Fogelqvist (Case C-407/98) [2000] ECR I-5539 149 Accession by the Community to the European Convention for the Protection of Human Rights and Fundamental Freedoms (Opinion 2/94) [1996] ECR I-1759 35 Acetificio Marcello de Nigris Srl v Commission (Case T-351/09) [2011] ECR II-216 175 ACF Chemiefarma NV v Commission (Re Quinine Cartel) (Case 41/69) [1970] ECR 661 365, 366, 374 Adams v Commission (Case 145/83) [1985] ECR 3539 190, 196 Adeneler and Others v Ellinikos Organismos Galaktos (ELOG) (Case C-212/04) [2006] ECR I-6057 93, 140 Adidas AG (Case C-223/98) [1999] ECR I-7081 137 Administration des Douanes et Droits Indirects v Léopold Legros and others (Case C-163/90) [1992] ECR I-4625 229 Adoui v Belgium and City of Liège; Cornuaille v Belgium (Joined Cases 115 and 116/81) [1982] ECR 1665 494 Adriatica di Navigazione SpA v Commission (Case T-61/99) [2003] ECR II-5349 366 AEG-Telefunken AG v Commission (Case 107/82) [1983] ECR 3151, EU:C:1983:293 345, 358, 367, 370 Aéroports de Paris v Commission (Case C-82/01 P) [2002] ECR I-9297 339 Aéroports de Paris v Commission (Case T-128/98) [2000] ECR II-3929 339 Aerospatiale-Alenia/de Havilland ([1991] OJ L334/42) 410 Afrikanische Frucht-Compagnie GmbH and Internationale Fruchtimport Gesellschaft Weichert and Co v Council and Commission (Joined Cases T-64/01 and T-65/01) [2004] ECR II-527 194 AGM-COS MET Srl v Suomen valtio and Lehtinen (Case C-470/03) [2007] ECR I-2749 119 Ahmed Saeed Flugreisen and Silver Line Reisebüro GmbH v Zentrale zur Bekämpfung unlauteren Wettbewerbs eV (Case 66/86) [1989] ECR 803 344, 346, 363, 393 Airtours plc v Commission (Case T-342/299) [2002] ECR II-2585 410 AK v Krajowa Rada Sądownictwa and CP and DO v Sąd Najwyższy (Joined Cases C-585/18, C-624/18 and C-625/18) EU:C:2019:982 81 Åklagaren v Mickelsson and Roos (Case C-142/05) [2009] ECR I-4273 272 Aktien-Zuckerfabrik Schöppenstedt v Council (Case 5/71) [1971] ECR 975 188, 191 AKZO Chemie BV v Commission (Case C-62/86) [1991] ECR I-3359 391, 399 Akzo Nobel and Others v Commission (Case C-97/08 P) [2009] ECR I-8237 346

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Akzo Nobel and Others v Commission (Case T-112/05) [2007] ECR II-5049 344 Alabaster v Woolwich plc and Secretary of State for Social Security (Case C-147/02) [2004] ECR I-3101 157 Alaimo v Préfet du Rhône (Case 68/74) [1975] ECR 109 488 Ålands vindkraft AB v Energimyndigheten (Case C-573/12) EU:C:2014:2037 226, 292 Albany International BV v Stichting Bedrijfspensieonfonds Textielindutrie (Case C-97/96) [1999] ECR I-5751 342 Albore (Case C-423/98) [2000] ECR I-5965 493 Alcan/Pechiney (II) [2003] OJ C299/19 411 Alfa Vita Vassilopoulos AE and Carrefour Marinopoulos AE v Elliniko Dimosio and Nomarchiaki Aftodioikisi Ioanninon (Joined Cases C-159/04, C-158/04) [2006] ECR I-8135 267, 268 Alfons Lütticke GmbH v Hauptzollamt Sarrelouis (Case 57/65) [1966] ECR 205 237 Allgemeine Elektrizitäts-Gesellschaft AEG-Telefunken AG v Commission see AEG-Telefunken AG v Commission 358, 367, 370 Alliance One International and Standard Commercial Tobacco v Commission and Commission v Alliance One International and Others (Joined Cases C-628/10 P and C 14/11 P) EU:C:2012:479 346 Allué and Coonan v Università degli studi di Venezia (Case 33/88) [1989] ECR 1591 330 Allué and others v Università degli studi di Venezia and Università degli studi di Parma (Joined Cases C-259/91, C-331/91 and C-332/91) [1993] ECR I-4309 493 Alokpa and Others v Ministre du Travail, de l’Emploi et de l’Immigration (Case C-86/12) EU:C:2013:645 456, 475 Amann & Söhne GmbH & Co KG and Cousin Filterie SAS v Commission (Case T-446/05) EU:T:2010:165 365 Ambulanz Glöckner and Landkreis Südwestpfalz (Case C-475/99) EU:C:2001:577 147 Amministrazione delle Finanze dello Stato v Denkavit Italiana (Case 61/79) [1980] ECR 1205 160 Amministrazione delle Finanze v Simmenthal (Case 106/77) [1978] ECR 629 75 Anagnostakis v European Commission (Case C-589/15) EU:C:2017:663 463 Anagnostakis v European Commission (Case T-450/12) EU:T:2015:739 463 Andersson and Wåkerås-Andersson (Case C-321/97) EU:C:1999:307 156 Antillean Rice Mills v Commission (Joined Cases T-480/93 and T-483/93) [1995] ECR II-2305 182 Anton Las v PSA Antwerp NV (Case C-202/11) EU:C:2013:239 322 AOIP/Beyrard [1976] OJ L6/8 338 Apple and Pear Development Council v KJ Lewis Ltd and others (Case 222/82) [1983] ECR 4083 232, 249, 258 Aquino v Belgium (Case C-3/16) EU:C:2017:209 121 ArcelorMittal Luxembourg v Commission and Commission v ArcelorMittal Luxembourg and Others (Joined Cases C-201/09 P and C-216/09) EU:C:2009:547 345 Ardolie Belanger Gemeenschap (ABG) BV/Oil Companies Operating in the Netherlands [1977] OJ L117/1) 355 Arnold André GmbH & Co KG v Landrat des Kreises Herford (Case C-434/02) [2004] ECR I-11825 209 ARO Lease BV v Inspecteur van de Belastingdienst Grote Ondernemingen te Amsterdam (Case C-190/95) [1997] ECR I-4383 307 AROW/BNIC [1982] OJ L379/1 368 Arsenal Football Club plc v Matthew Reed (No 2) (Case C-206/01) [2003] 1 CMLR 13 (ChD) 148 Arsenal Football Club plc v Matthew Reed [2001] 2 CMLR 23 (ChD) 148 Arsenal Football Club plc v Matthew Reed [2003] 2 CMLR 25 (CA) 148 Asnef-Equifax, Servicios de Información sobre Solvencia y Crédito, SL v Asociación de Usuarios de Servicios Bancarios (Ausbanc) (Case C-238/05) [2006] ECR I-11125 376 Asociación Española de Empresas de la Carne v Council (Case T-99/94) [1994] ECR II-871 177 Asociación Profesional Elite Taxi v Uber Systems Spain, SL (Case C-434/15) EU:C:2017:981 308 Associação Sindical dos Juízes Portugueses v Tribunal de Contas (Case C-46/16) EU:C:2018:117 128, 143 Association de médiation sociale v Union locale des syndicats CGT et al (Case C-176/12) EU:C:2014:2 58, 91 Association des Centres distributeurs Édouard Leclerc and others v SARL ‘Au blé vert’ and others (Case 229/83) [1985] ECR 17 278 Association France Nature Environnement v Premier minister and Ministère de l’Écologie, du Développement durable et de l’Énergie (Case C-379/15) EU:2016:603 153

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Associazione Nazionale Granosalus – Liberi Cerealicoltori & Consumatori (Associazione GranoSalus) v Commission (Case T-125/18) EU:T:2019:92 174 AstraZeneca AB and AstraZeneca plc v Commission (Case T-321/05) [2010] ECR II-2805 395 AstraZeneca/Novartis ([2004] OJ L110/4) 407 Athinaïki Techniki v Commission (Case C-521/06 P) EU:C:2008:422 165 Atlanta AG v European Community (Case C-104/97 P) [1999] ECR I-06983 193 Atlanta Fruchthandelsgesellschaft mbH and Others v Bundesamt für Ernährung und Forstwirtschaft (Case C-466/93) [1995] ECR I-3799 157 Atlantic Container Line AB and Others v Commission (Case T-395/94) [2002] ECR II-875 387 Atlantic Container Line AB and Others v Commission (Joined Cases T-191/98, T-212/98 to T-214/98) [2003] ECR II-3275 387 ATRAL SA v Belgium (Case C-14/02) [2003] ECR I-4431, EU:C:2003:265 89, 257 Aubriet v Ministre de l’Enseignement supérieur et de la Recherche (Case C-410/18) EU:C:2019:582 488 Austria Asphalt GmbH & Co OG v Bundeskartellanwalt (Case C-248/16) EU:C:2017:643 407 Austria v Germany (Case C-591/17) EU:C:2019:504 101 Austria v Germany (Case C-648/15) EU:C:2017:664 130 Automec Srl v Commission (Case T-24/90) [1992] ECR II-2223 422 Autortiesību un komunicēšanās konsultāciju aģentūra / Latvijas Autoru apvienība v Konkurences padome (Case C-177/16) EU:C:2017:689 357, 358, 400 Ax v Council (Case T-259/10) [2011] ECR II-176 175 Azienda Monte Arcosu Srl v Regione Autonoma della Sardegna, Organismo Comprensoriale no 24 della Sardegna and Ente Regionale per l’Assistenza Tecnica in Agricoltura (ERSAT) (Case C-403/98) [2001] ECR I-103 88

B B v Land Baden-Württemberg and Secretary of State for the Home Department v Vomero (Joined Cases C-316/16 and 424/16) EU:C:2018:256 497 B&I/Sealink, Holyhead [1992] 5 CMLR 255 395 Bacardi-Martini SAS, Cellier des Dauphins v Newcastle United FC (Case C-318/00) [2003] ECR I-905 157 Bagnasco and Others v Banca Popolare di Novara soc coop arl (BNP) and Cassa di Risparmio di Genova e Imperia SpA (Carige) (Joined Cases C-215/96 and C-216/96) [1999] ECR I-135 357, 360 Bajratari v Secretary of State for the Home Department (Case C-93/18) EU:C:2019:809 483 Balázs-Árpád Izsák and Attila Dabis v European Commission (Case C-420/16) EU:C:2019:177 463 ‘Baltlanta’ UAB v Lithuania (Case C-410/13) EU:C:2014:2134 54, 146 Bank Handlowy w Warszawie SA and PPHU ‘ADAX’/Ryszard Adamiak v Christianapol sp z o.o. (Case C-116/11) EU:C:2012:739 133 Baumbast and R v Secretary of State for the Home Department (Case C-413/99) [2002] ECR I-7091 452, 493 Bayer AG v Commission (Case T-41/96) [2000] ECR II-3383 366 Bayer CropScience SA-NV and Stichting De Bijenstichting v College voor de toelating van gewasbeschermingsmiddelen en biociden (Case C-442/14) EU:C:2016:890 132 Bayerische HNL Vermehrungsbetriebe GmbH & Co KG and others v Council and Commission (Re Skimmed-Milk Powder) (Joined Cases 83 and 94/76, 4, 15 and 40/77) [1978] ECR 1209 191 Beamglow Ltd v European Parliament and Others (Case T-383/00) [2005] ECR II-5465 189 Becker v Finanzamt Münster-Innenstadt (Case C-8/81) EU:C:1982:7 89 Béguelin Import Co v SAGL Import Export (Case 22/71) [1971] ECR 949 359 Bela-Mühle Josef Bergman KG v Grows-Farm GmbH & CO KG (Re Skimmed-Milk Powder) (Case 114/76) [1977] ECR 1211 41 Belgische Radio en Televisie and société belge des auteurs, compositeurs et éditeurs v SV SABAM and NV Fonior (Case 127/73) [1974] ECR 51 394 Belgium and Forum 187 ASBL v Commission (Joined Cases C-182/03 and C-217/03) EU:C:2006:416 181 Belgium v Commission (Case C-16/16 P) EU:C:2018:79 164 Belgium v Commission (Case T-131/16 R) EU:T:2016:427 133 Belgium v Commission (Case T-721/14) EU:T:2015:829 165

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Belgium v Humbel and Edel (Case 263/86) [1988] ECR 5365 308 Belgium v Spain (Case C-388/95) [2000] I-ECR 3123 101, 273, 286 Benedetti v Munari Fratelli SAS (Case 52/76) [1977] ECR 163 159 Bensada Benallal v Belgium (Case C-161/15) EU:C:2016:175 121 Benzine en Petroleum Handelsmaatschappij BV and others v Commission (Case 77/77) [1978] ECR 1513 394 Berlusconi and Finanziaria d’investimento Fininvest SpA (Fininvest) v Banca d’Italia and Istituto per la Vigilanza Sulle Assicurazioni (IVASS) (Case C-219/17) EU:C:2018:1023 151, 163 Bernini v Minister van Onderwijs en Wetenschappen (Case C-3/90) [1992] ECR I-1071 138 Bertelsmann AG and Sony Corporation of America v Independent Music Publishers and Labels Association (Impala) (Case C-413/06 P) [2008] ECR I-4951 394 Bethell v Commission (Case 246/81) [1982] ECR 2277 185 Bettray v Staatssecretaris van Justitie (Case 344/87) [1989] ECR 1621 303 Bionorica SE and Diapharm GmBH & Co KG v Commission (Joined Cases C-596/15 P and C-597/15 P) EU:C:2017:886 184 Blackspur DIY Ltd and Keller, Glancy and Cohen v Council (Case C-362/95 P) [1997] ECR I-4775 195 Blesgen v Belgium (Case 75/81) [1982] ECR 1211 263 Boeing/McDonnell Douglas [1997] OJ L336/16 410, 419 Bolivarian Republic of Venezuela v Council (Case T-65/18) EU:T:2019:649 176 Bond van Adverteerders and others v The Netherlands (Case 352/85) [1988] ECR 2085 308 Bonnarde v Agence de Services et de Paiement (Case C-443/10) [2011] ECR I-9327 279 Bonsignore v Oberstadtdirektor der Stadt Köln (Case 67/74) [1975] ECR 297 494 Borker (Case 138/80) [1980] ECR 1975 157 BPB Industries plc [1989] OJ L10/50 354 BPB Industries Plc and British Gypsum Ltd v Commission (Case T-65/89) [1993] ECR II-389 346 Bragança Linares Verruga and Others (Case C-238/15) EU:C:2016:949 488 Brasserie du Pêcheur SA v Germany and R v Secretary of State for Transport, ex parte Factortame Ltd and others (Joined Cases C-46 and 48/93) [1996] ECR I-1029 118, 120, 121, 188, 192 Bresciani v Amministrazione Italiana delle Finanze (Case 87/75) [1976] ECR 129 231 Bretagne Angleterre Irlande (BAI) v Commission (Case T-230/95) EU:T:1999:11 195 Bristol-Myers Squibb Pharma EEIG v Commission and European Medicines Agency (Case T-329/16) EU:T:2018:878 171 British Airways Plc v Commission (Case T-219/99) [2003] ECR II-5917, [2004] 4 CMLR 1008 354, 356, 391, 398, 400 British Airways v Commission (Case C-95/04) EU:C:2007:166 398 British Leyland plc v Commission (Case 226/84) [1986] ECR 3263 348, 394, 400 Broekmeulen v Huisarts Registratie Commissie (Case 246/80) [1981] ECR 2311 149 Brzezinski v Dyrektor Izby Celnej w Warszawie (Case C-313/05) [2007] ECR I-513 236 BSM Geraets-Smits v Stichting Ziekenfonds VGZ and HTM Peerbooms v Stichting CZ Groep Zorgverzekeringen (Case C-157/99) [2001] ECR I-5473 308 Buchler & Co v Commission (Case 44/69) [1970] ECR 733 366 Budĕjovický Budvar, národní podnik v Rudolf Ammersin GmbH (Case C-478/07) [2009] ECR I-7721 286 Budişan (Case C-586/14) EU:C:2016:421 235 Bulmer v Bollinger SA [1974] 4 Ch 401 135 Bundeskartellamt v Volkswagen AG and VAG Leasing GmbH (Case C-266/93) [1995] ECR I-3477 346 Bureau Européen des Unions des Consommateurs and National Consumer Council v Commission (Case T-37/92) [1994] ECR II-285 422 Bürgerausschuss für die Bürgerinitiative Minority SafePack – one million signatures for diversity in Europe v European Commission (Case T-646/13) EU:T:2017:59 464

C Caisse pour l’avenir des enfants v FV and GW (Case C-802/18) EU:C:2020:269 Calì & Figli Srl v Servizi ecologici porto di Genova SpA (SEPG) (Case C-343/95) [1997] ECR I-1547

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Calpak SpA and Società Emiliana Lavorazione Frutta SpA v Commission (Joined Cases 789–790/79) [1980] ECR 1949 52 Camera Care Ltd v Commission (Case 792/79 R) [1980] ECR 119 425 Campus Oil Limited and others v Minister for Industry and Energy and others (Case 72/83) [1984] ECR 2727 259, 278, 281 Canal Satélite Digital SL v Adminstración General del Estado and Distribuidora de Televisión Digital SA (DTS) (Case C-390/99) [2002] ECR I-607 322 Cantina sociale di Dolianova Soc coop rl and Others v Commission (Case T-166/98) [2004] ECR II-3998 193 Capolongo v Azienda Agricola Maya (Case 77/72) [1973] ECR 611 233 Carbonati Apuani Srl v Comune di Carrara (Case C-72/03) [2004] ECR I-8027 229 Cartesio Oktató és Szolgáltató bt (Case C-210/06) [2008] ECR I-9641 149, 310 Casagrande v Landeshauptstadt München (Case 9/74) [1974] ECR 773 488 Cascades SA v Commission (Case T-308/94) [1998] ECR II-925 366 Cassa di Risparmio di Firenze and Others (Case C-222/04) EU:C:2006:8 340 Caviro Distillerie Srl v Commission (Case C-345/18 P) EU:C:2019:589 171 Cement [1994] OJ L343/1 368 Cementbouw Handel & Industrie BV v Commission (Case T-282/02) [2006] ECR II-319 407 Centrafarm BV and de Peijper v Sterling Drug Inc (Case 15/74) [1974] ECR 1147 287, 288, 344 Centre Belge d’études de marché — Télémarketing (CBEM) v Compagnie luxembourgeoise de télédiffusion (CLT) and Information publicité Benelux (IPB) (Case 311/84) [1985] ECR 3261 402 Centre public d’action sociale d’Ottignies-Louvain-la-Neuve v Moussa Abdida (Case C-562/13) EU:C:2014:2453 58 Centros Ltd v Erhvervs- og Selskabsstyrelsen (Case C-212/97) [1999] ECR I-1459 311 Centrosteel Srl v Adipol GmbH (Case C-456/98) [2000] ECR I-6007 140 Charalampos Dounias v Ypourgio Oikonomikon (Case C-228/98) [2000] ECR I-577 235 Chavez-Vilchez and Others (Case C-133/15) EU:C:2017:354 458 Chemial Farmaceutici SpA v DAF SpA (Case 140/79) [1981] ECR 1 241 Chenchooliah v Minister for Justice and Equality (Case C-94/18) EU:C:2019:693 484 Chevron/Texaco [2001] OJ C128/2 407 Chiquita Brands International, Inc, Chiquita Co BV and Chiquita Italia, SpA v Commission (Case T-19/01) [2005] ECR II-315 93 Chrysostomides & Co LLC v Council (Case T-680/13) EU:T:2018:486 189 CIA Security International SA v Signalson SA and Securitel SPRL (Case C-194/94) [1996] ECR I-2201 96 CICRA v Régie nationale des usines Renault (Case 53/87) [1988] ECR 6039 398 Cimenteries CBR and Others v Commission (Case T-25/95) [2000] ECR II-491 368 Cimenteries CBR Cementsbedrijven NV and others v Commission (Noordwijks Cement Accord) (Case 8-11/66 SA) [1967] ECR 75 166 Cinéthèque SA and others v Fédération nationale des cinémas français (Joined Cases 60 and 61/84) [1985] ECR 2605 293 Cipra and Kvasnicka v Bezirkshauptmannschaft Mistelbach (Case C-439/01) [2003] ECR I-745 169 Cisal di Battistello Venanzio & C Sas v Istituto nazionale per l’assicurazione contro gli infortuni sul lavoro (INAIL) (Case C-218/00) [2002] ECR I-691 343 Clearstream Banking AG and Clearstream International SA v Commission (Case T-301/04) EU:T:2009:317 397 ClientEarth v Commission (Case C-57/16 P) EU:C:2018:660 21, 65 CMA CGM and others v Commission (Case T-213/00) [2003] ECR II-913 383 CMC Cooperativa muratori e cementisti and others v Commission (Case 118/83) [1985] ECR 2325 189 Codorníu SA v Council (Case C-309/89) [1994] ECR I-1853 176 Cogeco Communications Inc v Sport TV Portugal SA and Others (Case C-637/17) EU:C:2019:32 437 Cogis (Compania Generale Interscambi) v Amministrazione delle Finanze dello Stato (Case 216/81) [1982] ECR 2701 238 College van Burgemeester en Wethouders van de gemeente Amersfoort v X BV and Visser Vastgoed Beleggingen BV v Raad van de gemeente Appingedam (Joined Cases C-360/15 and C-31/16) EU:C:2018:44 137, 148, 313

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Collins v Secretary of State for Work and Pensions (Case C-138/02) [2004] ECR I-2703 489 Coman and Others v Inspectoratul General pentru Imigrări and Ministerul Afacerilor Interne (Case C-673/16) EU:C:2018:385 479 Commission and Others v Kadi (Joined Cases C-584/10 P, C-593/10 P and C-595/10 P) EU:C:2013:518 170 Commission v Anic Partecipazioni SpA (Case C-49/92 P) [1999] ECR I-4125 364 Commission v AssiDomän Kraft Products AB and others (Case C-310/97 P) EU:C:1999:407 172 Commission v Austria (Case C-147/03) [2005] ECR I-5969 103, 106 Commission v Austria (Case C-320/03 R) [2005] ECR I-7929 223, 292 Commission v Austria (Case C-524/07) [2008] ECR I-187 256 Commission v Austria (Case C-53/08) [2011] ECR I-4309 332 Commission v BASF (Case C-137/92 P) [1994] ECR I-2555 168 Commission v Belgium (Case 77/69) [1970] ECR 237 103 Commission v Belgium (Case 156/77) [1978] ECR 1881 187 Commission v Belgium (Case 149/79) [1980] ECR 3881, [1982] ECR 1845 330 Commission v Belgium (Case 247/85) EU:C:1987:339 53 Commission v Belgium (Case 42/87) [1988] ECR 5445 108 Commission v Belgium (Case C-173/94) [1996] ECR I-3265 330, 331 Commission v Belgium (Case C-47/08) [2011] ECR I-4105 332 Commission v Belgium (High-speed Networks) (Case C-543/17) EU:C:2019:573 107, 108, 132 Commission v Belgium (Re Birds Born and Bred in Captivity) (Case 100/08) [2009] ECR I-140 226 Commission v Belgium (Re University Fees) (Case 293/85) [1988] ECR 305 104 Commission v Belgium (Re Walloon Waste) (Case C-2/90) [1992] ECR I-4431 226 Commission v Belgium and Luxembourg (Re Gingerbread) (Case 2-3/62) [1962] ECR 425 228 Commission v Camar Srl and Tico Srl (Case C-312/00 P) [2002] ECR I-11355 194 Commission v Council (Case C-25/94) [1996] ECR I-1469, EU:C:1996:114 25, 55 Commission v Council (Case C-687/15) EU:C:2017:803 51, 65, 167 Commission v Council (ERTA) (Case 22/70) [1971] ECR 263, EU:C:1971:32 34, 139, 164, 166 Commission v Council (Joined Cases C-626/15 and C-659/16) EU:C:2018:925 25, 51, 164 Commission v Council (Re Deficit Procedure) (Case C-27/04) [2004] ECR I-6679 184 Commission v Denmark (Case 211/81) [1982] ECR 4547 104 Commission v Denmark (Case 302/86) [1988] ECR 649 292 Commission v Denmark (Case C-192/01) [2003] ECR I-9693 283 Commission v Denmark (Re Taxes on Wine) (Case 106/84) [1986] ECR 833 237 Commission v European Parliament and Council (Case C-378/00) [2003] ECR I-937 168 Commission v Finland (Case C-10/08) EU:C:2009:171 235 Commission v France (Case 6/69) [1969] ECR 523 108 Commission v France (Case 152/78) [1980] ECR 2299 278 Commission v France (Case 168/78) [1980] ECR 347 237 Commission v France (Case 42/82) EU:C:1983:88 106 Commission v France (Case 270/83) [1986] ECR 273 318 Commission v France (Case 307/84) [1986] ECR 1725 316, 330 Commission v France (Case C-35/97) [1998] ECR I-5325 160 Commission v France (Case C-55/99) [2000] ECR I-11499 284 Commission v France (Case C-1/00) [2001] ECR I-9989 295 Commission v France (Case C-304/02) [2005] ECR I-6263 113, 132 Commission v France (Case C-50/08) [2011] ECR I-4195 332 Commission v France (Case 197/08) [2010] ECR I-1599 278 Commission v France (Case C-416/17) EU:C:2018:811 103, 106, 152 Commission v France (Joined Cases 52 and 55/95) [1995] ECR I-4443 109 Commission v France (Re French Merchant Seamen) (Case 167/73) [1974] ECR 359 109 Commission v France (Re Levy on Reprographic Machines) (Case 90/79) [1981] ECR 283 235 Commission v France (Re Postal Franking Machines) (Case 21/84) [1985] ECR 1356 259 Commission v France (Re Restrictions on Imports of Lamb) (Case 232/78) [1979] ECR 2729 109, 110

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Commission v France (Re Spanish Strawberries) (Case C-265/95) [1997] ECR I-6959 103, 110, 223, 246, 250, 252, 259, 280, 296 Commission v France (Re Tobacco) (Case C-302/00) [2002] ECR I-2055 238 Commission v Germany (Case 116/82) [1986] ECR 2519 108 Commission v Germany (Case 29/84) EU:C:1985:229 53 Commission v Germany (Case C-24/97) [1998] ECR I-2133 481 Commission v Germany (Case C-441/02) [2006] ECR I-3449 105 Commission v Germany (Case C-126/03) [2004] ECR I-11197 112 Commission v Germany (Case C-319/05) [2007] ECR I-9811 284 Commission v Germany (Re Ban on the Importation of Meat Products) (Case 274/87) [1989] ECR 229 279 Commission v Germany (Re Export of Waste) (Case C-389/00) [2003] ECR I-2001 231 Commission v Germany (Re IDA) (Case C-61/94) [1996] ECR I-3989 92 Commission v Germany (Re Inspection Fees on Live Animals) (Case 18/87) [1988] ECR 5427 230, 234 Commission v Germany (Re Law of Purity of Beer) (Case 178/84) [1987] ECR 1227 262, 291 Commission v Germany (Re Restrictions on Imports of Meat Products) (Case 153/78) [1979] ECR 2555 278 Commission v Greece (Case C-226/87) [1988] ECR 3611 108 Commission v Greece (Case 305/87) [1989] ECR 1461 317 Commission v Greece (Case C-290/94) [1996] ECR I-3285 331 Commission v Greece (Case C-387/97) [2000] ECR I-5047, EU:C:2000:356 114, 115 Commission v Greece (Case C-215/98) [1999] ECR I-4913 108 Commission v Greece (Case C-398/98) [2001] ECR I-7915 259, 281 Commission v Greece (Case C-155/09) [2011] ECR I-65 487 Commission v Greece (Case C-328/16) EU:C:2018:98 113 Commission v Greece (Case C-93/17) EU:C:2018:903 115 Commission v Greece (Re Infant Formula) (Case C-391/92) [1995] ECR I-1621 266 Commission v Greece (Re Taxes on Second-Hand Cars) (Case C-74/06) [2007] ECR I-7585 237 Commission v Ireland (Case 61/77) [1978] ECR 417 170 Commission v Ireland (Case C-39/88) [1990] ECR I-4271 109 Commission v Ireland (Case C-236/91) [1992] ECR I-5933 109 Commission v Ireland (Case C-381/92) [1994] ECR 215 109 Commission v Ireland (Case C-494/01) [2005] ECR I-3331 105, 112 Commission v Ireland (Case C-418/04) [2007] ECR I-10947 108 Commission v Ireland (Case C-427/07) EU:C:2009:457 53 Commission v Ireland (Re Buy Irish Campaign) (Case 249/81) [1982] ECR 4005 248, 252, 258, 264 Commission v Ireland (Re Irish Souvenirs) (Case 113/80) [1981] ECR 1625 259, 264, 278, 290, 294 Commission v Ireland (Re Taxation of Alcohol) (Case 55/79) [1980] ECR 489 240 Commission v Italy (Case 7/61) [1961] ECR 317 105 Commission v Italy (Case 7/69) [1970] ECR 111 108 Commission v Italy (Case 95/81) [1982] ECR 2187 278, 280 Commission v Italy (Case 78/82) [1983] ECR 1955 261 Commission v Italy (Case 101/84) [1985] ECR 2629 109 Commission v Italy (Case 225/85) [1987] ECR 2625 330 Commission v Italy (Case 168/85) [1986] ECR 2945 318 Commission v Italy (Case 63/86) [1988] ECR 29 316 Commission v Italy (Case C-209/89) [1991] ECR 1575, EU:C:1991:139 228, 232 Commission v Italy (Case C-35/96) [1998] ECR I-3851 341 Commission v Italy (Case C-439/99) [2002] ECR I-351 105 Commission v Italy (Case C-129/00) EU:C:2006:656 103 Commission v Italy (Case C-87/02) [2004] ECR I-5975 110 Commission v Italy (Case C-503/06 R) [2006] ECR I-141 111 Commission v Italy (Case C-518/06) [2009] ECR I-3491 321 Commission v Italy (Case C-531/06) [2009] ECR I-4103 321 Commission v Italy (Case C-68/11) EU:C:2012:815 109

xxii



EU Law

Commission v Italy (Case C-621/16 P) EU:C:2019:251 164 Commission v Italy (Case C-251/17) EU:C:2018:358 114 Commission v Italy (Re Art Treasures) (Case 7/68) [1968] ECR 423 226, 278 Commission v Italy (Re Customs Forwarding Agents) (Case C-119/92) [1994] ECR I-393 231 Commission v Italy (Re Environmental Tax) (Case C-173/05) [2007] ECR I-4917 227 Commission v Italy (Re Inspections and Formalities Outside Customs Office Hours) (Case 340/87) [1989] ECR 1483 230 Commission v Italy (Re Statistical Levy) (Case 24/68) [1969] ECR 193 228, 230, 234 Commission v Italy (Re Trailer) (Case C-110/05) [2009] ECR I-519 271, 293 Commission v Lithuania (Case C-61/12) ECLI:EU:C:2014:172 293 Commission v Luxembourg (Case C-351/90) [1992] ECR I-3945 318, 322 Commission v Luxembourg (Case C-111/91) [1993] ECR I-817 317 Commission v Luxembourg (Case C-473/93) [1996] ECR I-3207 331 Commission v Luxembourg and Belgium (Joined Cases 90 and 91/63) [1964] ECR 625 110 Commission v Malta (Case C-76/08 R [2008] ECR I-64 111 Commission v Netherlands (Case 89/76) [1977] ECR 1355 232 Commission v Netherlands (Case 96/81) [1982] ECR 1791 107 Commission v Netherlands (Case C-341/97) [2000] ECR I-6611 104 Commission v Netherlands (Case C-41/02) [2004] ECR I-11375 248, 252, 295 Commission v Parker Hannifin Manufacturing and Parker-Hannifin (Case C-434/13) EU:C:2014:2456 347 Commission v Poland (Case C-639/11) EU:C:2014:173 293 Commission v Poland (Case C-336/16) EU:C:2018:94 106, 109 Commission v Poland (Case C-441/17) EU:C:2018:255 103, 106 Commission v Poland (Case C-619/18) EU:C:2019:531 6, 57, 143 Commission v Poland (Polish Forest) (Case C-441/17 R) EU:C:2017:877 111 Commission v Poland (Re Technical Controls on Cars) (Case C-170/07) [2008] ECR I-87 257, 279, 289 Commission v Portugal (Case C-275/03) EU:C:2004:632 116 Commission v Portugal (Case C-70/06) [2008] ECR I-1 117 Commission v Portugal (Case C-265/06) [2008] ECR I-2245 271, 279 Commission v Portugal (Case C-292/11 P) EU:C:2014:3 117 Commission v Romania (Case C-638/18) EU:C:2020:334 106 Commission v Sociedade de Curtumes a Sul do Tejo Lda (Socurte) and Others (Case C-143/95 P) [1997] ECR I-1 172 Commission v Spain (Case 375/92) [1994] ECR I-1985 105 Commission v Spain (Case C-278/01) [2003] ECR I-14141 116 Commission v Spain (Case C-388/16) EU:C:2017:548 109 Commission v Spain (Case C-205/17) EU:C:2018:606 114 Commission v Sweden (Re Beer and Wine Taxes) (Case C-167/05) [2008] ECR I-2127 236 Commission v Tetra Laval BV (Case C-12/03 P) [2005] ECR I-987 410 Commission v UK (Case 207/83) [1985] ECR 1201 261 Commission v UK (Case C-246/89 R) [1989] ECR 3125 111 Commission v UK (Re Excise Duties on Wine) (Case 170/78) [1980] ECR 417 239 Commission v UK (Re Newcastle Disease – Import of Poultry Meat) (Case 40/72) [1982] ECR 2793 278, 289 Commission v UK (Re UHT Milk) (Case 124/81) [1983] ECR 203 282 Commission v United Kingdom (Tachographs) (Case 128/78) [1979] ECR I-419 52, 109 Compagnie Continentale (France) SA v Commission (Case C-391/96 P) EU:C:1998 194 175 Compagnie Continentale France v Council (Case 169/73) [1975] ECR 117 189 Compagnie générale maritime and others v Commission (Case T-86/95) [2002] ECR II-1011 386 Compagnie maritime belge transports SA and Compagnie maritime belge SA, Dafra-Lines A/S, Deutsche Afrika-Linien GmbH & Co and Nedlloyd Lijnen BV v Commission (Joined Cases T-24/93, T-25/93, T-26/93 and T-28/93) [1996] ECR II-1201 358, 392, 394, 398

Table of Cases



xxiii

Compagnie maritime belge transports SA, Compagnie maritime belge SA and Dafra-Lines A/S v Commission (Joined Cases C-395/96 P and C-396/96 P) [2000] ECR I-1365 393 Comptoir national technique agricole (CNTA) SA v Commission (Case 74/74) [1975] ECR 533 191 Conegate Limited v HM Customs & Excise (Case 121/85) [1986] ECR 1007 280 Confédération européenne des associations d’horlogers-réparateurs (CEAHR) v Commission (Case T-712/14) EU:T:2017:748 385 Confédérations de producteurs de fruits et légumes and Others v Council (Joined Cases 16–17/62) [1962] ECR 471 52 Congregación de Escuelas Pías Provincia Betania v Ayuntamiento de Getafe (Case C-74/16) EU:C:2017:135 340 Conseil national de l’Ordre des pharmaciens (CNOP) and Conseil central de la section G de l’Ordre national des pharmaciens (CCG) v Commission (Case T-23/09) [2010] ECR II-5291 424 Consiglio Nazionale degli Spedizionieri Doganali (CNSD) [1993] OJ L203/27 341 Consiglio Nazionale degli Spedizionieri Doganali v Commission (Case T-513/93) [2000] ECR II-1807 341 Consorci Sanitari del Maresme v Corporació de Salut del Maresme I la Selva (Case C-203/14) EU:C:2015:664 149 Consorzio del Prosciutto di Parma and Salumificio S Rita SpA v Asda Stores Ltd and Hygrade Foods Ltd (Case C-108/01) [2003] ECR I-512 286 Convention No 170 of the International Labour Organization concerning safety in the use of chemicals at work (Opinion 2/91) [1993] ECR I-1061 34 Coöperatieve Vereniging ‘Suiker Unie’ UA and others v Commission (Re Sugar Cartel) (Joined Cases 40–48, 50, 54–56, 111, 113 and 114/73) [1975] ECR 1663 345, 346, 364, 369, 370, 394, 395, 397, 418 Cooperativa Agricola Zootecnica S Antonio and Others v Amministrazione delle Finanze dello Stato (Joined Cases 246/94, C-247/94, C-248/94 and C-249/94) EU:C:1996:329 86 Cooperativa Co-Frutta Srl v Amministrazione delle finanze dello Stato (Case 193/85) [1987] ECR 2085 229 Corbiau v Administration des contributions (Case C-24/92) EU:C:1993:118 149 Corus UK Ltd, formerly British Steel plc (Re Seamless Steel) v Commission (Case T-48/00) [2004] ECR II-2325 366 Costa v ENEL (Case 6/64) [1964] ECR 585 4, 5, 43, 77, 85, 118, 139, 147 Coty Germany GmbH v Parfümerie Akzente GmbH (Case 230/16) EU:C:2017:941 374 Council of the City of Stoke-on-Trent and Norwich City Council v B & Q plc (Case C-169/91) [1992] ECR I-6635 148, 263 Council v Commission (Macro-Financial Assistance) (Case C-409/13) EU:C:2015:217 21, 65 Council v Growth Energy and Renewable Fuels Association (Case C-465/16 P) EU:C:2019:155 175 Courage Ltd v Crehan and Crehan v Courage Ltd and Others (Case C-453/99) [2001] ECR I-6297 381, 432 Craeynest and Others v Brussels Hoofdstedelijk Gewest and Brussels Instituut voor Milieubeheer (Case C-723/17) EU:C:2019:533 81 Cresco Investigation GmbH v Achatzi (Case C-193/17) EU:C:2019:43 58, 90 Criminal proceedings against Abdel (Case C-75/12) [2012] OJ C303/15 157 Criminal Proceedings against Arcaro (Case C-168/95) [1996] ECR I-4705 82, 140 Criminal proceedings against Becu, Verweire, Smeg NV and Adia Interim NV (Case C-22/98) [1999] ECR I-5665 346 Criminal Proceedings against Berlusconi, Adelchi and Dell’Utri and Others (Joined Cases C-387/02, C-391/02 and C-403/02) EU:C:2005:270 90 Criminal proceedings against Bluhme (Case C-67/97) [1998] ECR I-8033 267, 282 Criminal proceedings against Bordessa, Marí Mellado and Barbero Maestre (Joined Cases C-358/93 and C-416/93) [1995] ECR I-361 226 Criminal proceedings against Bouchoucha (Case C-61/89) [1990] ECR I-3551 319 Criminal proceedings against Calfa (Case C-348/96) [1999] ECR I-11 495 Criminal proceedings against Even and Office national des pensions pour travailleurs salariés (ONPTS) (Case 207/78) [1979] ECR 2019 487 Criminal proceedings against Gilli and Andres see Gilli and Andres 262 Criminal proceedings against Guimont (Case C-448/98) [2000] ECR I-1663 251

xxiv



EU Law

Criminal proceedings against Jan van de Haar and Kaveka de Meern BV (Joined Cases 177 and 178/82 [1984] ECR 1797 254 Criminal proceedings against Keck and Mithouard (Joined Cases C-267 and C-268/91) [1993] ECR I-6097 265, 266, 267, 269, 271, 272, 276, 293 Criminal proceedings against Kieffer and Thill see Kieffer and Thill 251 Criminal proceedings against Kolpinghuis Nijmegen BV (Case 80/86) [1987] ECR 3969 82, 140 Criminal proceedings against Leendert van Bennekom (Case 227/82) [1983] ECR 3883 279 Criminal proceedings against Luc Vanderborght (Case C-339/15) EU:C:2017:335 321 Criminal proceedings against Lyckeskog (Case C-99/00) [2002] ECR I-4839 152 Criminal proceedings against Marchandise, Chapuis and SA Trafitex (Case C-332/89) [1991] ECR I-1027 263 Criminal proceedings against Messner (Case C-265/88) [1989] ECR 4209 481 Criminal proceedings against Mutsch (Case 137/84) [1985] ECR 2681 488 Criminal proceedings against Oosthoek’s Uitgeversmaatschappij BV (Case 286/81) [1982] ECR 4575 250 Criminal proceedings against Pistre Michèle (Joined Cases C-321/94), Barthes (C-322/94), Milhau (C-323/94) and Oberti (C-324/94) [1997] ECR I-2343 250 Criminal proceedings against Placanica, Palazzese and Sorricchio (Joined Cases C-338/04, C-359/04 and C-360/04) [2007] ECR I-1891 322 Criminal proceedings against Ratti (Case 148/78) [1979] ECR 1629 86 Criminal proceedings against Richardt and Les Accessoires Scientifiques SNC (Case C-367/89) [1991] ECR I-4621 281 Criminal proceedings against Sandoz (Case 174/82) [1983] ECR 2445 283 Criminal proceedings against Sjöberg and Gerdin (Joined Cases C-447/08 and C-448/08) [2010] ECR I-6921 308 Criminal proceedings against Spasic (Case C-129/14 PPU) ECLI:EU:C:2014:586 129 Criminal proceedings against Tankstation ’t Heukske vof and JBE Boermans (Joined Cases C-401 and 402/92) [1994] ECR I-2199 266 Criminal Proceedings against Taricco and Others (Case C-105/14) EU:C:2015:555 75, 148 Criminal proceedings against U (Case C-420/15) EU:C:2017:408 317 Criminal proceedings against Wijsenbeek (Case C-378/97) [1999] ECR I-6207 481 Cristini v Société nationale des chemins de fer français (Case 32/75) [1975] ECR 1085 487 CRT France International SA v Directeur régional des impôts de Bourgogne (Case C-109/98) [1999] ECR I-2237 236 Cruciano Siragusa v Regione Sicilia – Soprintendenza Beni Culturali e Ambientali di Palermo (Case C-206/13) EU:C:2014:126 57 Cullet and Chambre syndicale des réparateurs automobiles et détaillants de produits pétroliers v Centre Leclerc à Toulouse and Centre Leclerc à Saint-Orens-de-Gameville (Case 231/83) [1983] ECR 305 280 Czech Republic v Commission (Case C-696/15 P) EU:C:2017:595 48

D D’Hoop v Office national de l’emploi (Case C-224/98 [2002] ECR I-6191 Da Costa en Schaake NV, Jacob Meijer NV, Hoechst-Holland NV v Netherlands Inland Revenue Administration (Joined Cases 28–30/62) [1963] ECR 31 DaimlerChrysler AG v Commission (Case T-325/01) [2005] ECR II-3319 Dalli v Commission (Case T-399/17) EU:T:2019:384 Dalli v Commission (Case T-562/12) EU:T:2015:270 Dalmine v Commission (Case C-407/04) EU:C:2007:53 Dano and Dano v Jobcenter Leipzig (Case C-333/13) EU:C:2014:2358 Dansk Denkavit (Case 29/87) EU:C:1988:299 Dansk Industri (DI) v Estate of Karsten Eigil Rasmussen (Case C-441/14) EU:C:2016:278 Dansk Pelsdyravlerforening v Commission (Case T-61/89) [1992] ECR II-1931 De Capitani v European Parliament (Case T-540/15) EU:T:2018:167 Decker v Caisse de maladie des employés privés (Case C-120/95) [1998] ECR I-1831 Defrenne v Société anonyme belge de navigation aérienne Sabena (Case 43/75) [1976] ECR 455 Deha Altiner and Ravn v Udlændingestyrelsen (Case C-230/17) EU:C:2018:497

487, 489 147 346 192, 193, 194 20, 164 357, 358 489 230 82 340, 368 64 278, 293 87 477

Table of Cases

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xxv

Deichmann SE v Hauptzollamt Duisburg (Case C-256/16) EU:C:2018:187 178 Deliège v Ligue Francophone de Judo et disciplines associées ASBL, Ligue belge de judo ASBL, Union européenne de judo and Pacquée (Case C-51/96 and C-191/97) [2000] ECR I-2549 307 Delimitis v Henninger Bräu (Case C-234/89) [1991] ECR I-935 377, 429 Delvigne v Commune de Lesparre-Médoc and Préfet de la Gironde (Case C-650/13) EU:C:2015:648 461 Demirel v Stadt Schwäbisch Gmünd (Case 12/86) [1987] ECR 3719 59, 92 Denkavit International BV, VITIC Amsterdam BV and Voormeer BV v Bundesamt für Finanzen (Joined Cases C-283, 291 and 292/94) [1996] ECR I-5063 120 Denkavit Nederland BV v Hoofdproduktschap voor Akkerbouwprodukten (Case 15/83) [1984] ECR 2171 251, 252 Department of Health and Social Security (Isle of Man) v Barr and Montrose Holdings Ltd (Case C-355/89) [1991] ECR-I 3479 150 Der Grüne Punkt – Duales System Deutschland GmbH v Commission (Case C-385/07 P) [2009] ECR I-6155, EU:C:2009:456 194, 195, 403 Der Grüne Punkt - Duales System Deutschland GmbH v Commission (Case T-151/91) EU:T:2007:154 403 Dereci and Others v Bundesministerium für Inneres (Case C-256/11) [2011] ECR I-11315 456, 457 Deutsche Bahn and Others v Commission (Joined Cases T-289/11, T-290/11 and T-521/11) EU:T:2013:404 424 Deutsche Grammophon Gesellschaft mbH v Metro-SB-Großmärkte GmbH & Co KG (Case 78/70) [1971] ECR 487 287 Deutsche Parkinson Vereinigung eV v Zentrale zur Bekämpfung unlauteren Wettbewerbs eV (Case C-148/15) EU:C:2016:776 261 Deutsche Renault AG v AUDI AG (Case C-317/91) [1993] ECR I-6227 288 Deutsche Telekom AG v Commission (Case C-271/03) EU:T:2008:101 400 Deutsche Telekom AG v Commission (Case C-280/08) EU:C:2010:603 400 Deutsche Telekom AG v Commission (Case T-827/14) EU:T:2018:930 344, 397 Deutscher Apothekerverband eV v 0800 DocMorris NV and Waterval (Case C-322/01) [2003] ECR I-14887 270, 284 Deutscher Handballbund eV v Kolpak (Case C-138/00) [2003] ECR I-4135 92 Deutscher Komponistenverband eV v Commission (Case 8-71) EU:C:1971:82 184 Deutz und Geldermann, Sektkellerei Breisach (Baden) GmbH v Council (Case 26/86) [1987] ECR 941 176 DI, acting on behalf of Ajos A/S v Estate of A (Case 15/2014) 148 Diallo v État belge (Case C-246/17) EU:C:2018:499 483 Diatta v Land Berlin (Case 267/83) [1985] ECR 567 479 Dillenkofer, Erdmann, Schulte, Heuer, Werner and Knor v Germany (Joined Cases C-178–179 and 188–190/94) [1996] ECR I-4845 120 Dirección General de Defensa de la Competencia and Asociación Española de Banca Privada (AEB) and Others (Case C-67/91) EU:C:1992:330 150 Distillers Company Limited v Commission (Case 30/78) [1980] ECR 2229 378 Dole Food Company, Inc and Dole Germany OHG v Commission (Case T-588/08) ECLI:EU:T:2013:130 373 Dominguez v Centre informatique du Centre Ouest Atlantique and Préfet de la région Centre (Case C-282/10) EU:C:2012:33 80 Dooel Uvoz-Izvoz Skopje Link Logistic N&N v Budapest Rendőrfőkapitánya (C-384/17) EU:C:2018:810 80 Dorsch Consult Ingenieurgesellschaft mbH v Bundesbaugesellschaft Berlin (Case C-54/96) [1997] ECR I-4961 149 Doughty v Rolls Royce Plc [1992] 1 CMLR 1045 91 Douwe Egberts NV v Westrom Pharma NV and Souranis, carrying on business under the commercial name of ‘Etablissements FICS’ and Douwe Egberts NV v FICS-World BVBA (Case C-239/02) [2004] ECR I-7007 212, 270 Dôvera zdravotná poistʼovň a, a.s. v European Commission (Case T-216/15) EU:T:2018:64 344 Dow Benelux v Commission (Case 85/87) [1989] ECR 3137 424 DP and Finanzamt Linz (Case C-545/18) EU:C:2019:286 148 Draft Agreement establishing a European laying-up fund for inland waterway vessels (Opinion 1/76) [1977] ECR 741 34

xxvi



EU Law

Dumortier Frères SA and Others v Council [1979] ECR 3091 Dunlop Slazenger International Ltd v Commission (Case T-43/92) [1994] ECR II-441 DW v Valsts sociālās apdrošināšanas aģentūra (Case C-651/16) EU:C:2018:162 Dyson Ltd v Commission (Case T-544/13) EU:T:2015:836 Dzodzi v Belgium (Joined Cases C-297/88 and C-197/89) [1990] ECR I-3763

195 366, 367 317 170 499

E E v Subdelegación del Gobierno en Álava (Case C-193/16) EU:C:2017:542 495 Efler and Others v European Commission (Case T-754/14) EU:T:2017:323 463 Egenberger v Evangelisches Werk für Diakonie und Entwicklung eV (Case C-414/16) EU:C:2018:257 97 EI du Pont de Nemours v Commission (Case C-172/12 P) EU:T:2018:445 346 Einfuhr- und Vorratsstelle für Getreide und Futtermittel v Köster and Berodt & Co (Case 25/70) [1970] ECR 1161 69 Elf Aquitaine v Commission (Case C-521/09) EU:C:2011:620 345 Elliniki Radiophonia Tileorassi AE and Panellinia Omospondia Syllogon Prossopikou v Pliroforissis and Kouvelas and Avdellas and others see ERT 59 Eman and Sevinger v College van burgemeester en wethouders van Den Haag (Case C-300/04) [2006] ECR I-8055 461 Emesa Sugar (Free Zone) NV v Aruba (Case C-17/98) [2000] ECR I-667 129 EMI Records Ltd v CBS United Kingdom Ltd (Case 51/75) [1976] ECR 811 367 Empresa Nacional de Urânio SA v Commission (Case C-107/91) [1993] ECR I-599 185 English Bridge Union Ltd, The v Commissioners for Her Majesty’s Revenue & Customs (Case C-90/16) ECLI:EU:C:2017:814 308 Enichem Anic SpA v Commission (Case T-6/89) [1991] ECR II-1623 365 Entreprenørforeningens Affalds/Miljøsektion (FFAD) v Københavns Kommune (Case C-209/98) [2000] ECR I-3743, EU:C:2000:279 272, 403 ERT (Case C-260/89) [1991] ECR 2925 59 Essent Netwerk Noord and Others (Case C-206/06) EU:C:2008:413 229 Esso Raffinage v European Chemicals Agency (Case T-283/15) EU:T:2018:263 165 Estée Lauder Cosmetics GmbH & Co OHG v Lancaster Group GmbH (Case C-220/98) [2000] ECR I-117 286 Estonia v European Parliament and Council (Case C-508/13) EU:C:2015:403 170 Établissements Consten SàRL and Grundig-Verkaufs-GmbH v Commission (Joined Cases 56 and 58/64) [1966] ECR 299 287, 356, 360, 374, 379, 384 Établissements Delhaize frères and Compagnie Le Lion SA v Promalvin SA and AGE Bodegas Unidas SA (Case C-47/90) [1992] ECR I-3669 251, 273 ETI and Others (Case C-280/06) EU:C:2007:775 347 Eugen Schmidberger, Internationale Transporte und Planzüge v Austria (Case C-112/00) [2003] ECR I-5659 246, 250, 296 Eugénio Branco, Lda (Case T-347/03) EU:T:2005:265 169 Eurobolt BV (Case C-644/17) EU:C:2019:555 151, 178 Europamur Alimentación SA v Dirección General de Comercio y Protección del Consumidor de la Comunidad Autónoma de la Región de Murcia (Case C-295/16) EU:C:2017:782 156 European Citizens’ Initiative One of Us and Others v European Commission (Case T-561/14) EU:T:2018:210 464 European Commission v United Kingdom of Great Britain and Northern Ireland (Case C-172/13) EU:C:2015:50 311 European Night Services Ltd (ENS) and others v Commission (Case T-374/94) [1998] ECR II-3141 358, 386 European Ombudsman v Lamberts (Case C-234/02 P) [2004] ECR I-2838, EU:C:2004:174 188, 194 European Ombudsman v Staelen (Case C-337/15 P) EU:C:2017:256 193, 195 European Parliament v Council (Case C-65/90) [1992] ECR I-4593 68 European Parliament v Council (Case C-65/93) [1995] ECR I-4593 68 European Parliament v Council (Re Budgetary Procedure) (Case 377/87) [1988] ECR 4045 184 European Parliament v Council (Re Chernobyl) (Case C-70/88) [1990] ECR I-2041 18, 27

Table of Cases

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xxvii

European Parliament v Council (Re Comitology) (Case 302/87) [1988] ECR 5615 27 European Parliament v Council (Re Transport Policy) (Case 13/83) [1985] ECR 1513 27, 183 European Union Copper Task Force v Commission (Case C-384/16 P) EU:C:2018:76 180 European Union v Guardian Europe (Joined Cases C-447/17 P and C-479/17 P) EU:C:2019:672 183 European Union v Kendrion NV (Case C-150/17 P) EU:C:2018:1014 189 Europemballage Corporation and Continental Can Company Inc v Commission (Case 6/72) [1973] ECR 215 348, 352, 363, 419 Europese Gemeenschap v Otis NV and Others (Case C-199/11) EU:C:2012:684 434 Eurotunnel SA and Others v SeaFrance (Case C-408/95) [1997] ECR I-6315 179 Expedia Inc v Autorité de la concurrence and others (Case C-226/11) EU:C:2012:795 378 ExxonMobil/BEB [2004] OJ C8/7 407

F Faccini Dori v Recreb Srl (Case C-91/92) [1994] ECR I-3325 83, 118, 119, 141 Farrell v Whitty and Others (Case C-413/15) EU:C:2017:745 90 FC Terhoeve v Inspecteur van de Belastingdienst Particulieren/Ondernemingen buitenland (Case C-18/95) [1999] ECR I-345 320 Federación Nacional de Empresas de Instrumentación Cientifica, Médica, Técnica y Dental (FENIM) v Commission (Case T-319/99) [2003] ECR II-360 343 Fédération Charbonnière de Belgique v High Authority (Case 8/55) [1954-1956] ECR 292 34, 40 Fédération de l’industrie de l’huilerie de la CEE (Fediol) v Commission (Case 70/87) [1989] ECR 1781 60, 93 Fédération des industries condimentaires de France (FICF) and Others v Commission (Case T-317/02) EU:T:2004:360 171 Fédération Française des Sociétés d’Assurances and Others v Ministère de l’Agriculture et de la Pêche (Case C-244/94) [1995] ECR I-4013 340, 342 Fenoll v Centre d’aide par le travail ‘La Jouvene’, Association de parents et d’amis de personnes handicapées mentales (APEI) d’Avignon (Case C-316/13) EU:C:2015:200 94, 303 FENS spol. s r.o. v Slovak Republic – Úrad pre reguláciu sieťových odvetví (Case C-305/17) EU:C:2018:986 227 Ferreira da Silva e Brito and Others v Portugal (Case C-160/14) EU:C:2015:565 121, 152 Fertisac SL v European Chemicals Agency (Case T-855/16) EU:T:2018:118 164 FIAMM and Others v Council and Commission (Case C-120/06 P and C-121/06 P) [2008] ECR I-06513 193 Fidium Finanz AG v Bundesanstalt für Finanzdienstleistungsaufsicht (Case C-452/04) [2006] ECR I-9521 308 Filipiak v Dyrektor Izby Skarbowej w Poznaniu (Case C-314/08) EU:C:2009:719 78 Finanziaria Siderurgica Finsider SpA (in liquidation), Italsider SpA (in liquidation) and Societa Acciaierie e Ferriere Lombarde Falck SpA v Commission (Joined Cases C-363/88 and C-364/88) EU:C:1992:44 188 Firma Ambulanz Glöckner v Landkreis Südwestpfalz (Case C-475/99) [2001] ECR I-8089 357, 358 Firma Denkavit Futtermittel GmbH v Minister für Ernährung, Landwirtschaft und Forsten des Landes Nordrhein-Westfalen (Case 251/78) [1979] ECR 3369 257, 279 Firma Fink-Frucht GmbH v Hauptzollamt München-Landsbergerstrasse (Case 27/67) [1968] ECR 223 237 Firma Herbert Scharbatke GmbH v Germany (Case C-72/92) [1993] ECR I-5509 229 Firma Molkerei-Zentrale Westfalen/Lippe GmbH v Hauptzollamt Paderborn (Case 28/67) [1968] ECR 144 86 Fitzwilliam Executive Search Ltd v Bestuur van het Landelijk instituut sociale verzekeringen (Case C-202/97) [2000] ECR I-883 306 Flat glass [1989] OJ L33/44 393 Florea Gusa v Minister for Social Protection and Others (Case 442/16) ECLI:EU:C:2017:1004 305 Florescu and Others v Casa Judeţeană de Pensii Sibiu and Others (Case C-258/14) EU:2017:448 146 Foglia v Novello (No 1) (Case 104/79) [1980] ECR 745 157 Foglia v Novello (No 2) (Case 244/80) [1981] ECR 3045 157 Ford - Werke AG and Ford of Europe Inc v Commission (Joined Cases 25 and 26/84) [1985] ECR 2725 367 Ford España SA v Spain (Case 170/88) [1989] ECR 2305 231 Ford of Europe Incorporated and Ford-Werke Aktiengesellschaft v Commission (Joined Cases 228 and 229/82) [1984] ECR 1129 425

xxviii

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EU Law

Ford Werke AG and Ford of Europe Incorporated v Commission (Joined Cases 228/82 and 229/82 R) [1982] ECR 3091 425 Förster v Hoofddirectie van de Informatie Beheer Groep (Case C-158/07) [2008] ECR I-8507 491 Foselev Sud-Ouest SARL v Administration des douanes et droits indirects (Case C-18/08) EU:C:2008:647 91 Foster and Others v British Gas plc (Case C-188/89) [1990] ECR I-3133 90 Foto-Frost v Hauptzollamt Lübeck Ost (Case 314/85) [1987] ECR 4199 151 Fournier and Others v Commission (Joined Cases 114–117/79) [1980] ECR 1529 185 Fra.bo SpA v Deutsche Vereinigung des Gas- und Wasserfaches eV (DVGW) – Technisch-Wissenschaftlicher Verein (Case C-171/11) EU:C:2012:453 249 France Télécom SA v Commission (Case C-202/07 P) [2009] ECR I-2369 395 France Télécom SA v Commission (Case T-339/04) [2007] II-521 428 France Télécom SA v Commission (Case T-340/03) [2007] ECR II-107 353, 393, 399 France Télécom/Orange ([2000] OJ C261/07) 411 France v Commission (Case C-366/88) EU:C:1990:348 166 France v Commission (Case C-327/91) [1994] ECR I-3641 166 France v Commission (Case C-57/95) [1997] ECR I-1640 55 France v United Kingdom (Case 141/78) [1979] ECR 2923 101 Franco-Japanese ball-bearings agreement [1974] OJ L343/19 418 Francovich and Bonifaci and others v Italy (Joined Cases C-6 and 9/90) [1991] ECR I-5357 77, 86, 117, 118, 119, 121, 139, 192 Francovich and Others v Italy (Joined Cases C-6 and 9/90) [1991] ECR I-5357 77 Frascogna v Caisse des dépôts et consignations (Case 157/84) [1985] ECR 1739 488 Fratelli Costanzo v Milano (Case 103/88) [1989] ECR 1839 78 Fratelli Cucchi v Avez SpA (Case 77/76) [1977] ECR 987 233 Fratelli Pardini SpA v Ministero del Commercio con l’Estero and Banca Toscana (Lucca branch) (Case 338/85) [1988] ECR 2041 157 Fratelli Variola SpA v Amministrazione italiana delle Finanze (Case 34/73) [1973] ECR 981 52, 88 Freskot AE v Elliniko Dimosio (Case C-355/00) [2003] ECR I-5263 229 Front Populaire pour la libération de la saguia-el-hamra et du rio de oro (Front Polisario) v Council (Case T-512/12) EU:T:2015:953 68, 174 Fuß v Stadt Halle (Case C-429/09) [2010] ECR I-12167 120, 121, 122 Futura Participations SA and Singer v Administration des contributions (Case C-250/95) [1997] ECR I-2471 320

G garantovaná a.s. v European Commission (Case T-392/09) EU:T:2012:674 344 Garcia Avello v Belgium (Case C-148/02) [2003] ECR I-11613 453 Garlsson Real Estate SA and Others (Case 537/16) EU:C:2018:193 87 Gascogne Sack Deutschland GmbH and Gascogne v European Union (Case T-577/14) EU:T:2017:1 195 Gauweiler and Others v Deutscher Bundestag (Case C-62/14) EU:C:2015:400 157 Gbagbo et al v Council (Joined Cases C-478/11 to C-482/11 P) EU:C:2013:258 172 Gebhard v Consiglio dell’Ordine degli Avvocati e Procuratori di Milano (Case C-55/94) [1995] ECR I-4165 306, 307, 309, 320, 321, 322 Geddo v Ente Nazionale Risi (Case 2/73) [1973] ECR 865 252, 276 Geigy v Commission (Case 52/69) [1972] ECR 787 345 Gemeinsamer Betriebsrat EurothermenResort Bad Schallerbach GmbH v EurothermenResort Bad Schallerbach GmbH (Case C-437/17) EU:C:2019:193 318 Gencor v Commission (Case T-102/96) [1999] ECR II 753 419 General Electric/Honeywell [2004] OJ L48/1 419 General Motors Continental NV v Commission (Case 26/75) [1975] ECR 1367 400 General Química and Others v Commission (Case C-90/09) EU:C:2011:21 345 Georgsmarienhütte GmbH and Others v Germany (Case C-135/16) EU:C:2018:582 178 Germany and Others v Commission (Joined Cases 281, 283–285 and 287/85) [1987] ECR 3203 34 Germany v Commission (Re Brennwein) (Case 24/62) [1963] ECR 63 50

Table of Cases

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xxix

Germany v Council (Amendment of the Convention concerning International Carriage by Rail – COTIF) (Case C-600/14) EU:C:2017:935 33 Germany v Council (Case C-122/95) [1998] ECR I-973 172 Germany v European Parliament and Council (Re Tobacco Advertising) (Case C-376/98) [2000] ECR I-8419 51, 134 Giersch and Others (Case C-20/12) EU:C:2013:411 488 Gilli and Andres (Case 788/79) [1980] ECR 2071 262 Gintec International Import-Export GmbH v Verband Sozialer Wettbewerb eV (Case C-374/05) [2007] ECR I-9517 211 Giuffrida v Council (Case 105/75) [1976] ECR 1395 170 Global Starnet Ltd v Ministero dell’Economia e delle Finanze and Amministrazione Autonoma Monopoli di Stato (Case C-322/16) EU:C:2017:985 150 Goldman Sachs Group, Inc, Thev European Commission (Case T-419/14) EU:T:2018:445 345, 374 Gollnisch v European Parliament (Joined Cases T-346/11 and T-347/11) EU:T:2013:23 171 Gondrand Frères and Garancini (Case 169/80) [1981] ECR 1931 169 Gowan Comércio Internacional e Serviços Lda v Ministero della Salute (Case C-77/09) EU:C:2010:803 171 Grad v Finanzamt Traunstein (Case 9/70) [1970] ECR 825 86, 137 Green Source Poland sp. z o.o v Commission (Case T-512/14) EU:T:2017:299 174 Greenpeace and Others v Commission (Case C-585/93) EU:T:1995:147 181 Grifoni v European Atomic Energy Community (No 1) (Case C-308/87) [1990] ECR I-1203 194 Grimaldi v Fonds des Maladies Professionnelles (Case C-322/88) [1989] ECR 4407 54, 146 Groener v Minister for Education and the City of Dublin Vocational Educational Committee (Case C-379/87) [1989] ECR 3967 318 Grzelczyk v Centre public d’aide sociale d’Ottignies-Louvain-la-Neuve (Case C-184/99) [2001] ECR I-6193 447, 452, 460, 486, 488, 489 Guardian Europe Sàrl v European Union (Case T-673/15) EU:T:2017:377 183 Guérin automobiles v Commission (Case C-282/95) P [1997] ECR I-1503 423 Gul Ahmed Textile Mill Ltd v Council and Commission (Case C-100/17 P) EU:C:2018:842 171 Gül v Regierungspräsident Düsseldorf (Case 131/85) [1986] ECR 1573 310 GVL [1981] OJ L370/49 338

H H & R Ecroyd Holdings Ltd v Commission (Case T-220/97) [1999] ECR II-1677 160 H Krantz GmbH and Co v Ontvanger der Directe Belastingen and Netherlands State (Case C-69/88) [1990] ECR I-583 263 H v Land Berlin (Case C-174/16) EU:C:2017:637 78 Haahr Petroleum Ltd v Åbenrå Havn and others (Case C-90/94) [1997] ECR I-4085, EU:C:1997:368 229, 241 Haim v Kassenzahnärztliche Vereinigung Nordrhein (Case C-424/97) [2000] ECR I-5123 119 Hamas v Council (Case T-400/10) of 17 December 2014 134 Hampshire v The Board of the Pension Protection Fund (Case C-17/17) EU:C:2018:674 91 Hansa Fleisch Ernst Mundt GmbH & Co KG v Landrat des Kreises Schleswig-Flensburg (Case C-156/91) EU:C:1992:423 91 Hauptzollamt Mainz v CA Kupferberg & Cie KG aA (Case 104/81) [1982] ECR 3641 92 Her Majesty’s Customs and Excise v Schindler and Schindler (Case C-275/92) [1994] ECR I-1039 226, 308 Her Majesty’s Revenue and Customs v Henrika Dakneviciute (Case C-544/18) EU:C:2019:761 305 Herbert Karner Industrie-Auktionen GmbH v Troostwijk GmbH (Case C-71/02) [2004] ECR I-3025 296 Hermes Hitel és Faktor Zrt v Nemzeti Földalapkezelö Szervezet (Case C-16/12) EU:C:2012:426 157 HFB Holding für Fernwärmetechnik Beteiligungsgesellschaft mbH & Co KG and Others v Commission (Case T-9/99) [2002] ECR II-1487 366 Hilti AG v Commission (Case T-30/89) [1991] ECR II-1439 349, 392, 397, 398, 400 Hitachi-LG Data Storage Inc and Hitachi-LG Data Storage Korea Inc (Case T-1/16) EU:T:2019:514 375 Hochtief Solutions AG Magyarországi Fióktelepe v Fővárosi Törvényszék (Case C-620/17) EU:C:2019:630 119 Hoechst AG v Commission (Case T-10/89) [1992] ECR II-629 368

xxx

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EU Law

Hoechst v Commission (Joined Cases 46/87 and 227/88) [1989] ECR 2859 424 Hoeckx v Openbaar Centrum voor Maatschappelijk Welzijn, Kalmthout (Case 249/83) [1985] ECR 973 487 Hoekstra (née Unger) v Bestuur der Bedrijfsvereniging voor Detailhandel en Ambachten (Case 75/63) [1964] ECR 178 302 Hoffmann La Roche v Centrafarm (Case 107/76) [1977] ECR 957 152 Hoffmann-La Roche & Co AG v Commission (Case 85/76) [1979] ECR 461 352, 363, 391, 392, 393, 396, 397, 398 Hoffmann-La Roche AG v Accord Healthcare OU (Case C-572/15 F) EU:C:2016:739 47 Höfner and Elser v Macrotron (Case C-41/90) [1991] ECR I-1979 339 Holcim (Deutschland) AG v Commission (Case C-282/05 P) [2007] ECR I-2941 195 Holcim (Romania) SA v Commission (Case T-317/12) EU:T:2014:782 190 Holcim (Romania) SA v European Commission (Case C-556/14 P) EU:C:2016:207 194 Holistic Innovation Institute, SLU v Agence exécutive pour la recherche (Case T-706/14) EU:T:2017:89 189 Honeywell [2011] 1 CMLR 1067 84 HTTS Hanseatic Trade Trust & Shipping GmbH v Commission (Case C-123/18 P) EU:C:2019:694 188 Hugin Kassaregister AB and Hugin Cash Registers Ltd v Commission (Case 22/78) [1979] ECR 1869 351, 358, 393, 397 Humanplasma GmbH v Austria (Case C-421/09) [2010] ECR I-12869 226, 279 Humblot v Directeur des services fiscaux (Case 112/84) [1985] ECR 1367 241 Hünermund and others v Landesapothekerkammer Baden-Württemberg (Case C-292/92) [1993] ECR I-6787 266 Hungary v Commission (Case C-31/13 P) EU:C:2014:70 165 Hungary v Slovak Republic (Case C-364/10) EU:C:2012:630 101 Hydrotherm Gerätebau GmbH v Compact del Dott. Ing Mario Andreoli & C Sas (Case 170/83) [1984] ECR 2999 344

I Iannelli & Volpi SpA v Ditta Paolo Meroni (Case 74/76) [1977] ECR 557 IBM v Commission (Case 60/81) [1981] ECR 2639, EU:C:1981:264 Icap plc and Others v Commission (Case T-180/15) EU:T:2017:795 Iccrea Banca SpA Istituto Centrale del Credito Cooperativo v Banca d’Italia (Case C-414/18) EU:C:2019:1036 IFG Intercontinentale Fleischhandelsgesellschaft mbH & Co KG v Freistaat Bayern (Case 1/83) [1984] ECR 349 Iida v Stadt Ulm (Case C-40/11) EU:C:2012:691 Impact v Minister for Agriculture and Food and Others (Case C-268/06) EU:C:2008:223 Imperial Chemical Industries Ltd v Commission (Re Dyestuffs) (Case 48/69) [1972] ECR 619

248 54, 164 373 175, 176

232 456, 475 81 344, 369, 370, 373, 418 IMS Health GmbH & Co OHG v NDC Health GmbH & Co KG (Case C-418/01) [2004] ECR I-5039 398 Inalca SpA – Industria Alimentari Carni and Cremonini SpA v Commission (Case C-460/09) EU:C:2013:111 195 Indeliu ir investiciju draudimas and Nemaniunas (Case C-371/13) EU:C:2015:418 90 Industria Gomma Articoli Vari IGAV v Ente nazionale per la cellulosa e per la carta ENCC (Case 94/74) [1975] ECR 699 229 Industrial tubes Commission Decision C.38.240 (C(2003) 4820) 365 Industrie des poudres sphériques SA v Commission (Case T-5/97) EU:T:2000:278 399 Intel Corp v Commission (Case C-413/17) EU:C:2017:632 402, 420 Intel Corp v Commission (Case T-286/09) EU:T:2014:547 349, 398, 401, 418 Inter-Environnement Wallonie SBL v Région Wallone (Case C-129/96) [1997] ECR I-7411 89 Inter-Huiles and others (Case 172/82) [1983] ECR 555 272 Intermodal Transports BV v Staatssecretaris van Financiën (Case C-495/03) EU:C:2005:215 153 Internacional de Productos Metálicos (IPM) SA v Commission (Case C-145/17 P) EU:C:2018:839 177 International Business Machines Corporation v Commission see IBM v Commission 54 International Fruit Company NV v Produktschap voor groenten en fruit (Joined Cases 51–54/71) [1971] ECR 1107 256

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xxxi

International Fruit Company NV and Others v Produktschap voor Groenten en Fruit (Joined Cases 21–24/72) [1972] ECR 1219 60, 92 International Management Group v Commission (Joined Cases C-183/17 P and C-184/17 P) EU:C:2019:78 165 Internationale Handelsgesellschaft mbH v Einfuhr- und Vorratsstelle für Getreide und Futtermittel (Case 11/70) [1970] ECR 1125 77, 83 Inuit Tapiriit Kanatami and others v European Parliament and Council (Case C-583/11P) EU:C:2013:625 63 Inuit Tapiriit Kanatami and others v European Parliament and Council (Case T-18/10) [2011] ECR II-5599 63, 138, 178 Inzirillo v Caisse d’allocations familiales de l’arrondissement de Lyon (Case 63/76) [1976] ECR 2057 487 Irish Creamery Milk Suppliers Association and others v Government of Ireland and others; Doyle and others v An Taoiseach and others (Joined Cases 36 and 71/80) [1981] ECR 735 151 Irish Sugar plc v Commission (Case C-497/99 P) [2001] ECR I-5333 400 Irish Sugar plc v Commission (Case T-228/97) [1999] ECR II-2969 392 Islamic Republic of Iran Shipping Lines v Council (Case C-225/17 P) EU:C:2019:82 170 Istanbul Lojistik Ltd v Nemzeti Adó- és Vámhivatal Fellebbviteli Igazgatóság (Case C-65/16) EU:C:2017:770 228 Istituto Chemioterapico Italiano Spa and Commercial Solvents Corporation v Commission (Joined Cases 6 and 7/73) [1974] ECR 223 345, 358, 397, 400 Italian flat glass [1981] OJ L326/32 338 Italmobiliare SpA and Others v Commission (Case T-523/15) EU:T:2019:499 345, 346

J Jägerskiöld v Gustafsson (Case C-97/98) [1999] ECR I-7319 Javico International and Javico AG v Yves Saint Laurent Parfums SA (YSLP) (Cases C-306/96) [1998] ECR I-1983 JC v Kreissparkasse Saarlouis (Case C-66/19) EU:C:2020:242 JCJ Wouters, JW Savelbergh and Price Waterhouse Belastingadviseurs BV v Algemene Raad van de Nederlandse Orde van Advocaten (Case C-309/99) [2002] ECR I-1577 Jégo-Quéré et Cie SA v Commission (Case T-177/01) [2002] ECR II-2365 Jersey Produce Marketing Organisation Ltd v States of Jersey and Jersey Potato Export Marketing Board (Case C-293/02) [2005] ECR I-9543 Jessy Saint Prix v Secretary of State for Work and Pensions (Case C-507/12) ECLI:EU:C:2014:2007 JFE Engineering Corp, formerly NKK Corp, Nippon Steel Corp, JFE Steel Corp and Sumitomo Metal Industries Ltd v Commission (Re Seamless Steel Tubes and Pipes) (Joined Cases T-67/00, T-68/00, T-71/00 and T-78/00) [2004] ECR II-2501 Jia v Migrationsverket (Case C-1/05) [2007] ECR I-1 Job Centre coop arl (Case C-55/96) [1997] ECR I-7119 Jobcenter Berlin Neukölln v Nazifa Alimanovic and Others (Case C-67/14) EU:C:2015:597 John Deere Ltd v Commission (Case T-35/92 P) [1994] ECR II-957 John Walker & Sons Ltd v Ministeriet for Skatter og Afgifter (Case 243/84) [1986] ECR 875 Johnston v Chief Constable of the Royal Ulster Constabulary (Case 222/84) [1986] ECR 1651 Jongeneel Kaas BV and others v State of the Netherlands and Stichting Centraal Orgaan Zuivelcontrole (Case 237/82) [1984] ECR 483, EU:C:1983:294 Junqueras Vies (Case 502/19) EU:C:2019:1115 JYSK sp. z o.o. v Commission (Case T-403/15) EU:T:2017:300

226 357 147 341, 368 177 230 305

366 480 339 490 366 234, 242 91 143, 273 148, 159 178

K K v Staatssecretaris van Veiligheid en Justitie and HF v Belgische Staat (Joined Cases C-331/16 and C-366/16) EU:C:2018:296 KA and Others v Belgische Staat (Case C-82/16) EU:C:2018:308 Kaefer and Procacci v France (Case C-100/89) [1990] ECR-I 4647 Kakavetsos-Fragkopoulos AE Epexergasias kai Emporias Stafidas v Nomarchiaki Aftodioikisi Korinthias (Case C-161/09) [2011] ECR I-915

496 459 150 279

xxxii

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EU Law

Kamer van Koophandel en Fabrieken voor Amsterdam v Inspire Art Ltd (Case C-167/01) EU:C:2003:512 311 Kamino International Logistics BV and Datema Hellmann Worldwide Logistics BV v Staatssecretaris van Financiën (Joined Cases C-129/13 and C-130/13) EU:C:2014:2041 170 Kancelaria Medius SA v RN (Case C-495/19) EU:C:2020:431 156 Kantarev v Balgarska Narodna Banka (Case C-571/16) EU:C:2018:807 120 KE KELIT Kunststoffwerk GmbH v Commission (Re District Heating Pipes) (Case T-17/99) [2002] ECR II-1647 366 Kemikalieinspektionen v Toolex Alpha AB (Case C-473/98) [2000] ECR I-5681 279 Kempf v Staatssecretaris van Justitie (Case 139/85) [1986] ECR 1741 138, 303 Kempter KG v Hauptzollamt Hamburg-Jonas (Case C-2/06) [2008] ECR I-411 150 Kendrion NV v European Union (Case T-479/14) EU:T:2017:48 189, 195 Ker-Optika bt v ÀNTSZ Dél-dunántúli Regionális Intézete (Case C-108/09) [2010] ECR I-12213 223, 285 Kieffer and Thill (Case C-114/96) [1997] ECR I-3629 251 Klausner Holz Niedersachsen GmbH v Land Nordrhein-Westfalen (Case C-505/14) EU:C:2015:742 81 Klein v Commission (Case C-346/17 P) EU:C:2018:679 189 Klohn v An Bord Pleanála (Case C-167/17) EU:C:2018:833 92 Kloppenburg v Finanzamt Leer (Case 70/83) [1984] ECR 1075 56 Köbler (Case C-224/01) [2003] ECR I-10239 118 Koinopraxia Enóséon Georgikon Synetairismon Diacheiríséos Enchorion Proïonton Syn PE (KYDEP) v Council and Commission (Case C-146/91) [1994] ECR I-4199 193 Kone and Others (Case C-557/12) EU:C:2014:1317 432 Koninklijke Philips Electronics NV v Commission (Case T-92/13) EU:T:2015:605 373 Konkurrensverket v TeliaSonera Sverige AB (Case C-52/09) [2011] ECR I-527 397 Konle v Austria (Case C-302/97) [1999] ECR I-3099 119 Konsumentombudsmannen (KO) v De Agostini (Svenska) Förlag AB (Case C-34/95) and TV-Shop i Sverige AB (Joined Cases C-35/95 and C-36/95) [1997] ECR I-3843 269 Konsumentombudsmannen (KO) v Gourmet International Products AB (GIP) (Case C-405/98) [2001] ECR I-1795 269 Kotnik and Others v Državni zbor Republike Slovenije (Case C-526/14) EU:C:2016:570 146, 169 Kraus v Land Baden-Württemberg (Case C-19/92) [1993] ECR I-1663 317, 319 Kreil v Germany (Case C-285/98) [2000] ECR I-69 493 Kremzow v Austria (Case C-299/95) [1997] ECR I-2629 156 Kristiansen v Rijksdienst voor Arbeidsvoorziening (Case C-92/02) [2003] ECR I-14597 148 Krohn Import-Export v Commission (Case 175/84) EU:C:1986:85 189 Kücükdeveci v Swedex GmbH & Co KG (Case C-555/07) [2010] ECR I-365 80, 97, 141 Kurt Kampffmeyer Mühlenvereinigung KG and others v Commission and Council (Joined Cases 56 to 60/74) [1976] ECR 711 191, 194, 195 Kuwait Petroleum (GB) Ltd and Commissioners of Customs & Excise (Case C-48/97) EU:C:1999:203 137

L La Cinq SA v Commission (Case T-44/90) [1992] ECR II-1 425 Läärä, Cotswold Microsystems Ltd and Oy Transatlantic Software Ltd v Kihlakunnansyyttäjä (Jyväskylä) and Suomen valtio (Finnish State) (Case C-124/97) [1999] ECR I-6067 226 Laboratoires Pharmaceutiques Bergaderm SA and Goupil v Commission (Case C-352/98 P) [2000] ECR I-5291 192, 193, 194 Ladbroke Racing Deutschland GmbH v Commission (Case T-74/92) [1995] ECR II-115 186 Lahorgue v Ordre des avocats du barreau de Lyon and Others (Case C-99/16) EU:C:2017:391 319 Lair v Universität Hannover (Case 39/86) [1988] ECR 3161 488 Land Baden-Württemberg v Tsakouridis (Case C-145/09) [2010] ECR I-11979 497 Land Nordrhein-Westfalen v Uecker and Jacquet v Land Nordrhein-Westfalen (Joined Cases C-64/96 and C-65/96) [1997] ECR I-3171 453 Landesgrundverkehrsreferent der Tiroler Landesregierung v Beck Liegenschaftsverwaltungsgesellschaft mbH, and Bergdorf Wohnbau GmbH (Case C-355/97) EU:C:1999:391 156

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xxxiii

Landkreis Südliche Weinstraße v PF and Others ((Case C-830/18) EU:C:2020:275 488 Lawrie-Blum v Land Baden-Württemberg (Case 66/85) [1986] ECR 2121 302, 304, 329, 330 LC Nungesser KG and Eisele v Commission (Case 258/78) [1982] ECR 2015 286, 383 Leclerc-Siplec (Case C-412/93) [1995] ECR I-179 268 Ledra Advertising Ltd v Commission and European Central Bank (Case T-289/13) EU:T:2014:981 190 Lehtonen, Castors Canada Dry Namur-Braine ASBL v Fédération Royale Belge des Sociétés de Basket-ball ASBL (FRBSB) (Case C-176/96) [2000] ECR I-2681 157 Leussink and others v Commission (Joined Cases 169/83 and 136/84) [1986] ECR 2801 192 Levantina Agricola Industrial SA (LAISA) and CPC España SA v Council (Joined Cases 31 and 35/86) EU:C:1988:211 47 Levin v Staatssecretaris van Justitie (Case 53/81) [1982] ECR 1035 138, 302 LG Electronics, Inc v Commission (Case T-91/13) EU:T:2015:609 346, 373 Lidl Italia Srl v Comune di Arcole (VR) (Case C-315/05) [2006] ECR I-11181 212 Lietuvos Respublikos Seimo narių grupė (Case C-2/18) EU:C:2019:962 89 Liga Portuguesa de Futebol Profissional and Bwin International Ltd v Departamento de Jogos da Santa Casa da Misericórdia de Lisboa (Case C-42/07) [2009] ECR I-7633 308 Lodewijk Gysbrechts and Santurel Inter BVBA (Case C-205/07) [2008] ECR I-9947 274 London Borough of Harrow v Ibrahim and Secretary of State for the Home Department (Case C-310/08) [2010] ECR I-1065 453, 488 Lounes v Secretary of State for the Home Department (Case C-165/16) EU:C:2017:862 477 Lucaccioni v Commission (Case C-257/98 P) EU:C:1999:402 193 Ludwigs-Apotheke München Internationale Apotheke v Juers Pharma Import-Export GmbH (Case C-143/06) [2007] ECR I-9623 284 Lufthansa/Austrian Airlines [2010] OJ C16/10 411 Luís Manuel dos Santos v Fazenda Pública (Case C-640/17) EU:C:2018:275 235 Luisi and Carbone v Ministero del Tesoro (Joined Cases 286/82 and 26/83) [1984] ECR 377 308

M Maastricht [1994] 1 CMLR 57 84 Magill TV Guide/ITP, BBC and RTE [1989] OJ L78/43 353 Magnan v Commission (Case T-99/19) EU:T:2019:693 185 Mahmood and Others v Minister for Justice and Equality (Case C-169/18) EU:C:2019:5 144 Mallis and Others v Commission and ECB (Joined Cases C-105/15 P to C-109/15 P) EU:C:2016:702 165 Malta Dental Technologists Association and John Salomone Reynaud v Superintendent tas-Saħħa Pubblika and Kunsill tal-Professjonijiet Kumplimentari għall-Mediċina (Case C-125/16) EU:C:2017:707 321 Manfredi v Lloyd Adriatico Assicurazioni SpA, Cannito v Fondiaria Sai SpA and Tricarico and Murgolo v Assitalia SpA (Joined Cases C-295/04 to C-298/04) [2006] ECR I-6619, EU:C:2006:461 432, 436 Mangold v Helm (Case C-144/04) [2005] ECR I-9981 96, 97 Manufacture française des pneumatiques Michelin v Commission (Michelin II) (Case T-203/01) [2003] ECR II-4071 398 Maria do Céu Bragança Linares Verruga and Others v Ministre de l’Enseignement supérieur et de la Recherche (Case C-238/15) EU:C:2016:949 317 Marks & Spencer plc v David Halsey (Her Majesty’s Inspector of Taxes) (Case C-446/03) EU:C:2005:763 310 Marleasing SA v La Comercial Internacional de Alimentaciòn SA [1990] ECR I-4135 94 Marshall v Southampton and South-West Hampshire Area Health Authority (Case 152/84) [1986] ECR 723 80 Martínez Sala v Freistaat Bayern (Case C-85/96) [1998] ECR I-2691 485, 489 Masterfoods Ltd v HB Ice Cream Ltd (Case C-344/98) [2000] ECR I-11369 429 Matra Hachette SA v Commission (Case T-17/93) [1994] ECR II-595 383 McCarthy v Secretary of State for the Home Department (Case C-434/09) [2011] ECR I-3375, EU:C:2011:277 455, 457, 476 Meilicke v ADV/ORGA FA Meyer AG (Case C-83/91) [1992] ECR I-4871 157 Melloni v Ministerio Fiscal (Case C-399/11) EU:C:2013:107 76 Merci convenzionali porto di Genova SpA v Siderurgica Gabrielli SpA (Case C-179/90) [1991] ECR I-5889 395

xxxiv



EU Law

Merck & Co Inc v Stephar BV and Exler (Case 187/80) [1980] ECR 2063 288 Meroni & Co, Industrie Metallurgische, SpA v High Authority of the European Coal and Steel Community (Case 9–10/56) [1958] ECR 133 30 Methylglucamine [2004] OJ L38/18 374 Metock and Others v Minister for Justice, Equality and Law Reform (Case C-127/08) [2008] ECR I-6241, EU:C:2008:449 475, 478 Metro SB-Grossmärkte GmbH & Co KG v Commission (Metro I) (Case 26/76) [1977] ECR 1875 374, 383, 384, 385, 387 Metro SB-Großmärkte GmbH & Co KG v Commission (Metro II) (Case 75/84) [1986] ECR 3021 392 Métropole télévision SA (M6) and others v Commission (Joined Cases T-185/00, T-216/00, T-299/00 and T-300/00) [2002] ECR II-3805 383 Meyhui NV v Schott Zwiesel Glaswerke AG (Case C-51/93) [1994] ECR I-3879 251 MG Tjebbes and Others v Minister van Buitenlandse Zaken (Case C-221/17) EU:C:2019:189 450 Miasto Łowicz v Skarb Państwa — Wojewoda Łódzki and Rzecznik Praw Obywatelskich v Prokurator Generalny (Joined Cases C-558/18 and C-563/18) EU:C:2020:234 151 Micheletti and others v Delegación del Gobierno en Cantabria (Case C-369/90) [1992] ECR I-4239 449 Michelin v Commission (Case T-203/01) [2003] ECR II 4071 344 Microban International Ltd and Microban (Europe) Ltd v Commission (Case T-262/10) [2011] ECR II-7697 179, 180 Microsoft (C(2004)900 final) 397, 419 Microsoft Corp v Commission (Case T-201/04) [2007] ECR II-3601, EU:T:2007:289 54, 134, 349, 392, 397, 419 Milchwerke Heinz Wöhrmann & Sohn KG and Alfons Lütticke GmbH v Commission (Joined Cases 31/62 and 33/62) [1962] ECR 155 187 Miles and Others v Écoles européennes (Case C-196/09) EU:C:2011:388 150 Minister for Justice and Equality (Deficiencies in the System of Justice) (Case C-216/18 PPU LM) EU:C:2018:586 144 Minister for Justice and Equality and Commissioner of An Garda Síochána v Workplace Relations Commission (Case C-378/17) EU:C:2018:979 79 Minister voor Vreemdelingenzaken en Integratie v Eind (Case C-291/05) [2007] ECR I-10719 475 Ministère public v Deserbais (Case 286/86) [1988] ECR 4907 262 Ministero della Salute v Coordinamento delle associazioni per la difesa dell’ambiente e dei diritti degli utenti e dei consumatori (Codacons) and Federconsumatori (Case C-132/03) [2005] ECR I-4167 295 Ministerul Administraţiei şi Internelor - Direcţia Generală de Paşapoarte Bucureşti v Jipa (Case C-33/07) [2008] ECR I-5157 480, 492, 493 Ministerul Justiţiei și Libertăţilor Cetăţenești v Agafiţei and Others (Case C-310/10) EU:2011:467 156 Ministre de l’Intérieur v Olazabal (Case C-100/01) [2002] ECR I-10981 482, 493 Monachos Eirinaios, kata kosmon Antonios Giakoumakis tou Emmanouil v Dikigorikos Syllogos Athinon (Case C-431/17) EU:C:2019:368 317 Montecatini SpA v Commission (Case C-235/92) P [1999] ECR I-4539 368 Mory SA and Others v Commission (Case C-33/14 P) EU:C:2015:609 182 Motosykletistiki Omospondia Ellados NPID (MOTOE) v Elliniko Dimosio (Case C-49/07) EU:C:2008:376 340 Mulder and Others and Heinemann v Council and Commission (Joined Cases C-104/89 and C-37/90) [1992] ECR I-3061 122, 169, 195 Mulder v Minister van Landbouw en Visserij (Case 120/86) [1988] ECR 2321 169 Municipality of Almelo v Energibedriff Ijsselmij (Case 393/92) [1994] ECR I-1477 226 Musik-Vertrieb membran GmbH and K-tel International v GEMA – Gesellschaft für musikalische Aufführungs- und mechanische Vervielfältigungsrechte (Joined Cases 55 and 57/80) [1981] ECR 147 286 Mutual Aid Administration Services NV v Commission (Joined Cases T-121/96 and 151/96) [1997] ECR II-1355 172

N Nádasdi v Vám- és Pénzügyőrség Észak-Alföldi Regionális Parancsnoksága (Case C-290/05) and Németh v Vám- és Pénzügyőrség Dél-Alföldi Regionális Parancsnoksága (Case C-333/05) [2006] ECR I-10115

235

Table of Cases

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xxxv

Nakajima All Precision Co Ltd v Council (Case C-69/89) [1991] ECR I-2069 60, 93 National Farmers’ Union and Secrétariat général du gouvernement (Case C-241/01) [2002] ECR I-9079 179 National Panasonic v Commission (Case 136/79) [1980] ECR 2033 424 Nationale Raad van Dierenkwekers en Liefhebbers VZW and Andibel VZW v Belgium (Case C-219/07) [2008] ECR I-4475 226 NAVEWA-ANSAEU [1982] OJ L167/39 340 Neculai Tarola v Minister for Social Protection (Case C-483/17) ECLI:EU:C:2019:309 305 Nederlandse Federatieve Vereniging voor de Groothandel op Elektrotechnisch Gebied and Technische Unie BV v Commission (Joined Cases T-5/00 and T-6/00) EU:T:2003:342; Austrian banks — ‘Lombard Club’ Commission Decision COMP/36.571/D-1 (C(2002) 2091 365 Neidel v Stadt Frankfurt am Main (Case C-337/10) EU:C:2012:263 302 Netherlands v Commission (Case 326/85) EU:C:1987:547 169 Netherlands v European Parliament and Council (Case C-377/98) [2001] ECR I-7149 39 Netherlands v P Bakker Hillegom BV (Case C-111/89) [1990] ECR I-1735 231 Netherlands v Reed (Case 59/85) [1986] ECR 1283 478 NF v European Council (Case T-192/16) EU:T:2017:128 28 Ninni-Orasche v Bundesminister für Wissenschaft, Verkehr und Kunst (Case C-413/01) [2003] ECR I-13187 303 Nold and Others v High Authority (Joined Cases 36, 37, 39 and 40/59) [1960] ECR 423 83, 170 Nordsee Deutsche Hochseefischerei GmbH v Reederei Mond, Hochsefischerei Nordstern AG & Co KG and Reederei Friedrich Busse Hochseefischerei Nordstern AG & Co KG (Case 102/81) [1982] ECR 1095 149 Northern Ireland Department of Agriculture and Rural Development v Commission (Case T-453/10) EU:T:2012:106 176 NS v Secretary of State for the Home Department and ME and Others v Refugee Applications Commissioner and Minister for Justice, Equality and Law Reform (Joined Cases C-411/10 and C-493/10) [2011] ECR 13905 57 NUT v St Mary’s School [1997] 3 CMLR 630 91 NV Algemene Transport- en Expeditie Onderneming van Gend & Loos v Netherlands Inland Revenue Administration (Case 26/62) [1963] ECR 1 4, 5, 85, 86, 87, 118, 137, 149, 224, 227 NV IAZ International Belgium and others v Commission (IAZ) (Joined Cases 96-102, 104, 105, 108 and 110/82) [1983] ECR 3369 368 NV International Fruit Company and others v Commission (Joined Cases 41–44/70) [1971] ECR 411 175 NV Nederlandsche Banden Industrie Michelin v Commission (Michelin I) (Case 322/81) [1983] ECR 3461 393, 395, 398, 400

O O and S v Maahanmuuttovirasto and Maahanmuuttovirasto v L (Joined Cases C-356/11 and C-357/11) EU:C:2012:776 456 O v Minister voor Immigratie, Integratie en Asiel and Minister voor Immigratie, Integratie en Asiel v B (Case C-456/12) EU:C:2014:135 475, 476 O’Flynn v Adjudication Officer (Case C-237/94) [1996] ECR I-2617 316, 488 ÖBB Personenverkehr AG v Starjakob (Case C-417/13) EU:C:2015:38 159 Oebel (Case 155/80) [1981] ECR 1993 263 Office national de l’emploi v Ioannidis (Case C-258/04) [2005] ECR I-8275 487, 488, 489 Officier van justitie v Koninklijke Kaasfabriek Eyssen BV (Case 53/80) [1981] ECR 409 282 Ognyanov (Case C-554/14) EU:C:2016:835 82 Ognyanov (Case C-614/14) EU:C:2016:514 145, 151, 159 OMT Programme 83 Onuekwere v Secretary of State for the Home Department (Case C-378/12) EU:C:2014:13 484 Opel Austria GmbH v Council (Case T-115/94) [1997] ECR II-39 65 Openbaar Ministerie of the Netherlands v van Tiggele (Case 82/77) [1978] ECR 25 260 Opinion 1/91 EU:C:1991:490 139 Opinion 2/94 [1996] ECR I-1759 33, 134 Opinion 1/09 EU:C:2011:123 139, 143 Opinion 1/13 EU:C:2014:2303 129

xxxvi

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EU Law

Opinion 2/13 EU:C:2014:2454 9, 59, 75, 128, 134, 136, 144 Opinion 1/15 EU:C:2017:592 139 Opinion 1/17 EU:C:2019:341 75, 139, 145 Ordre des avocats au Barreau de Paris v Klopp (Case 107/83) [1984] ECR 2971 319 Orfanopoulos and Others and Oliveri v Land Baden-Württemberg (Joined Cases C-482/01 and C-493/01) [2004] ECR I-5257 493, 495, 497 Oriol Junqueras Vies (Case C-502/19) EU:C:2019:1115 18 Oscar Bronner GmbH & Co KG v Mediaprint Zeitungs- und Zeitschriftenverlag GmbH & Co KG, Mediaprint Zeitungsvertriebsgesellschaft mbH & Co KG and Mediaprint Anzeigengesellschaft mbH & Co KG (Case C-7/97) [1998] ECR I-7791 398 Otis Gesellschaft mbH and Others v Land Oberösterreich and Others (Case C-435/18) EU:C:2019:1069 432

P Palmisani and Istituto Nazionale della Previdenza Sociale (INPS) (Case C-261/95) EU:C:1997:351 149 Panasonic Corp and MT Picture Display Co Ltd v Commission (Case T-82/13) EU:T:2015:612 373 Parfums Christian Dior SA and Parfums Christian Dior BV v Evora BV (Case C-337/95) [1997] ECR I-6013 150 Parker Pen Ltd v Commission (Case T-77/92) [1994] ECR II-549 358 Parliament v Meskens (Case C-412/992 P) EU:C:1994:308 183 Parti Ecologiste ‘Les Verts’ v European Parliament (Case 294/83) [1986] ECR 1339 176 Pavlov and Others v Stichting Pensioenfonds Medische Specialisten (Joined Cases C-180/98 to C-184/98) [2000] ECR I-6451 341 PB Groenveld BV v Produktschap voor Vee en Vlees (Case 15/79) [1979] ECR 3409 272 Peñarroja Fa (Joined Cases C-372/09 and C-373/09) [2011] ECR I-1785 331 Pensions-Sicherungs-Verein WaG v Bauer EU:C:2019:1128 91 Peroxygen products [1985] OJ L35/1 374 Petrea v Ypourgou Esoterikon kai Dioikitikis Anasygrotisis (Case C-184/16) EU:C:2017:684 499 Petrus v Bulgaria (Case C-451/14) EU:C:2015:71 58 Pfeiffer et al v Deutsches Rotes Kreuz, Kreisverband Waldshut eV (Joined Cases C-397/01 to C-403/01) [2004] ECR I-8835 81, 95, 141 PGNiG Supply & Trading GmbH v Commission (Case T-849/16) EU:T:2017:924 179 Philip Morris Brands SARL and Others v Secretary of State for Health (Case C-547/14) EU:C:2016:325 212 PI v Oberbürgermeisterin der Stadt Remscheid (Case C-348/09) EU:C:2012:300 495, 497 Pierre Fabre Dermo-Cosmétique (Case C-439/09) EU:C:2011:649 385 Pigs Marketing Board v Redmond (Case 83/78) [1978] ECR 2347 248 PJSC Rosneft Oil Company v Her Majesty’s Treasury and Others (Case C-72/15) EU:C:2017:236 168 Plaumann & Co v Commission (Case 25/62) [1963] ECR 95 53, 174, 175, 177 Poland v European Parliament and Council (Case C-358/14) EU:C:2016:325 212 Poland v European Parliament and Council (Case C-5/16) EU:C:2018:843 65 Polbud – Wykonawstwo sp. z o.o. (Case C-106/16) EU:C:2017:804 312 Polypropylene Cartel [1986] OJ L230/1 339 Popławski (Case C-573/17) EU:C:2019:530 79 Portgas – Sociedade de Produção e Distribuição de Gás SA v Ministério da Agricultura, do Mar, do Ambiente e do Ordenamento do Território (Case C-425/12) EU:C:2013:829 91 Portugal v Commission (Case T-33/09) [2011] ECR II-1429 117 Portugal v Council (Case C-149/96) [1999] ECR I-8395 92 Post Danmark A/S v Konkurrencerådet (Case C-209/10) EU:C:2012:172 397 Post Danmark A/S v Konkurrencerådet (Case C-23/14) EU:C:2015:651 396 Poucet v Assurances Générales de France (AGP) and Caisse Mutuelle Régionale du Languedoc-Roussillon (Camulrac) Pistre v Caisse Autonome Nationale de Compensation de l’Assurance Vieillesse des Artisans (Canvaca) (Joined Cases C-159 and 160/91) [1993] ECR I-637 343 Presidenza del Consiglio dei Ministri and Others v Pantuso and Others (Joined Cases C-616/16 and C-617/16) EU:C:2018:32 81 Pretore di Salò v Persons unknown (Case 14/86) [1987] ECR 2545 82, 160

Table of Cases

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xxxvii

PreussenElektra AG v Schhleswag AG (Case C-379/98) [2001] ECR I-2099 155 Prezes Urzędu Ochrony Konkurencji i Konsumentów v Tele2 Polska sp z oo, devenue Netia SA (Case C-375/09) [2011] ECR I-3055 429 Pringle v Government of Ireland, Ireland, The Attorney General (Case C-370/12) EU:C:2012:756 136, 146 Proceedings brought by Mircea Florian Freitag (Case C-541/15) EU:C:2017:432 454 Procureur de la République and Comité national de défense contre l’alcoolisme v Waterkeyn and others; Procureur de la République v Cayard and others (Joined Cases 314–316/81 and 83/82) [1982] ECR 4337 112 Procureur de la République de Besançon v Les Sieurs Bouhelier and others (Case 53/76) [1977] ECR 197 273 Procureur du Roi v Dassonville and Dassonville (Case 8/74) [1974] ECR 837 139, 253, 254, 263, 265, 266, 271, 287, 293 Pronuptia de Paris GmbH v Pronuptia de Paris Irmgard Schillgallis (Case 161/84) [1986] ECR 353 387 Puigdemont i Casamajóv and Comín i Oliveres v Commission (Case T-388/19 R) EU:T:2019:467 133 Punto Casa SpA v Sindaco del Comune di Capena and Comune di Capena and Promozioni Polivalenti Venete Soc coop arl (PPV) v Sindaco del Comune di Torri di Quartesolo and Comune di Torri di Quartesolo (Joined Cases C-69 and 258/93) [1994] ECR I-2363 266 Pupino (Case C-105/03) [2005] ECR I-5309 80 Puppinck and Others v Commission (Case C-418/18 P) EU:C:2019:1113 17, 464

Q Quanta Storage Inc (Case T-772/15) EU:T:2019:519 Quelle AG v Bundesverband der Verbraucherzentralen und Verbraucherverbände (Case C-404/06) [2008] ECR I-2685 Questore di Verona v Zenatti (Case C-67/98) [1999] ECR I-7289 Quietlynn Limited and Richards v Southend Borough Council (Case C-23/89) [1990] ECR I-3059

375 137 308 263

R R & V Haegeman v Belgium (Case 181/73) [1974] ECR 449 92, 146 R Buet and Educational Business Services (EBS) v Ministère public (Case 382/87) [1989] ECR 1235 263 R v Bouchereau (Case 30/77) [1977] ECR 1999 494 R v Henn and Darby (Case 34/79) [1979] ECR 3795 252, 279, 280 R v HM Treasury and Commissioners of Inland Revenue, ex parte Daily Mail and General Trust plc (Case 81/87) [1988] ECR 5483 310 R v HM Treasury, ex parte British Telecommunications plc (Case C-392/93) [1996] ECR I-1631 120 R v Immigration Appeal Tribunal and Singh, ex parte Secretary of State for Home Department (Case C-370/90) [1992] ECR I-4265 475 R v Immigration Appeal Tribunal, ex parte Antonissen (Case C-292/89) [1991] ECR I-745 138, 303, 304 R v Intervention Board for Agricultural Produce, ex parte Accrington Beef Co Ltd and Others (Case C-241/95) [1996] ECR I-6699 179 R v Ministry of Agriculture, Fisheries & Food, ex parte Hedley Lomas (Ireland) Ltd (Case C-5/94) [1996] ECR I-2553 119 R v Pieck (Case 157/79) [1980] ECR 2171 481 R v Royal Pharmaceutical Society of Great Britain, ex parte Association of Pharmaceutical Importers and others (Joined Cases 266 and 267/87) [1989] ECR 1295 284 R v Secretary of State for Health, ex parte British American Tobacco (Investments) Ltd and Imperial Tobacco Ltd (Case C-491/01) [2002] ECR I-11453 41 R v Secretary of State for Home Affairs, ex parte Santillo (Case 131/79) [1980] ECR 1585 494 R v Secretary of State for the Environment, Transport and the Regions, ex parte Omega Air Ltd and Omega Air Ltd, Aero Engines Ireland Ltd and Omega Aviation Services Ltd v Irish Aviation Authority (Joined Cases C-27/00 and 122/00) [2002] ECR I-2569 168 R v Secretary of State for Transport, ex parte Factortame Ltd and others (Factortame (No 1)) (Case C-213/89) [1990] ECR I-2433 79, 309 R v Secretary of State for Transport, ex parte Factortame Ltd and others (Case C-221/89) [1991] ECR I-3905 306

xxxviii

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EU Law

R v Secretary of State, ex parte British American Tobacco (Case C-491/01) [2002] ECR I-11453 169 R v Thompson, Johnson and Woodiwiss (Case 7/78) [1978] ECR 2247 226, 281 R, on the application of Alliance for Natural Health and Nutri-Link Ltd v Secretary of State for Health and R, on the application of National Association of Health Stores and Health Food Manufacturers Ltd v Secretary of State for Health and National Assembly for Wales (Joined Cases C-154/04 and C-155/04) [2005] ECR I-6451 209 R, on the application of Bidar v London Borough of Ealing and Secretary of State for Education and Skills (Case C-209/03) [2005] ECR I-2119 160, 490 R, on the application of Swedish Match AB and Swedish Match UK Ltd v Secretary of State for Health (Case C-210/03) [2004] ECR I-11893 252 R, on the application of Vodafone Ltd, Telefónica O2 Europe plc, T-Mobile International AG, Orange Personal Communications Services Ltd v Secretary of State for Business, Enterprise and Regulatory Reform (Case C-58/08) [2010] ECR I-4999 39 R, on the application of Wells v Secretary of State for Transport, Local Government and the Regions (Case C-201/02) [2004] ECR I-748 95 Raccanelli v Max-Planck-Gesellschaft zur Förderung der Wissenschaften eV (Case C-94/07) [2008] ECR I-5939 138 Racke v Hauptzollamt Mainz (Case 98/78) [1979] ECR 69 169, 170 Radio Telefis Eireann (RTE) and Independent Television Publications Ltd (ITP) v Commission (Magill) (Joined Cases C-241 and 242/91 P) [1995] ECR I-743 398 Radio Telefis Eireann v Commission (Case T-69/89) [1991] ECR II-489 354 Raiffeisen Zentralbank Österreich AG and Others v Commission (Re The Lombard Club) (Joined Cases T-259/02 to T-264/02 and T-271/02) [2006] ECR II-5169, EU:T:2006:39 360, 365 Ramrath v Ministre de la Justice and l’Institut des réviseurs d’entreprises (Case C-106/91) [1992] ECR I-3351 319 Raugevicius (Case C-247/17) EU:C:2018:898 486 Raulin v Minister van Onderwijs en Wetenschappen (Case C-357/89) [1992] ECR I-1027 303 Reina and Reina v Landeskreditbank Baden-Württemberg (Case 65/81) [1982] ECR 33 487 Remia VC and Others v Commission (Case 42/84) EU:C:1985:327 171 Rendón Marín v Administración del Estado (Case C-165/14) EU:C:2016:675 457, 458 René Lancry SA v Direction Générale des Douanes and Société Dindar Confort, Ah-Son, Chevassus-Marche, Société Conforéunion and Société Dindar Autos v Conseil Régional de la Réunion and Direction Régionale des Douanes de la Reunion (Case C-363/93) [1994] ECR I-3957 229 Rewe-Zentral AG v Bundesmonopolverwaltung für Branntwein (Cassis de Dijon) (Case 120/78) [1979] ECR 649 139, 212, 254, 255, 256, 259, 262, 265, 270, 276, 277, 289, 290, 291, 292, 293, 294, 298, 299, 320 Rewe-Zentralfinanz and Rewe-Zentral XC and Others v Generalprokuratur (Case C-234/17) EU:C:2018:853 121 Rewe-Zentralfinanz eG et Rewe-Zentral AG v Landwirtschaftskammer für das Saarland (Case 33/76) [1976] ECR 1989 121 Reyners v Belgium (Case 2/74) [1974] ECR 631 316, 331, 332 Reynolds Tobacco and Others v Commission (Case C-131/03 P) EU:C:2006:541 165 Rheinmühlen-Düsseldorf v Einfuhr- und Vorratsstelle für Getreide und Futtermittel (No 1) (Case 166/73) [1974] ECR 33 144 Rhône-Poulenc SA v Commission (Re Polypropylene cartel) (Case T-1/89) [1991] ECR II-867 371 Rijksdienst voor Pensioenen v Brouwer (Case C-577/08) [2010] ECR I-7489 160 Riviera Auto Service Etablissements Dalmasso SA, Garage des quatre vallées SA, Tosi, Palma SA (CIA - Groupe Palma) and Palma v Commission Joined Cases T-185/96, T-189/96 and T-190/96 [1999] ECR II-93 422 Roquette Frères SA v Directeur général de la concurrence, de la consommation et de la répression des fraudes, and Commission (Case C-94/00) [2002] ECR I-9011 424 Rosengren and others v Riksåklagaren (Case C-170/04) [2007] ECR I-4071 256, 282 Rottmann v Freistaat Bayern (Case C-135/08) [2010] ECR I-1449 449 Royer (Case 48/75) [1976] ECR 497 481, 499 Ruiz Zambrano v Office national de l’emploi (ONEm) (Case C-34/09) [2011] ECR I-1177 454, 456, 457, 458, 460

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Rutili v Ministre de l’intérieur (Case 36/75) [1975] ECR 1219 482, 494, 499 Ryanair Designated Activity Company v Országos Rendőr-főkapitányság (Case C-754/18) EU:C:2020:478 481

S S v Minister voor Immigratie, Integratie en Asiel and Minister voor Immigratie, Integratie en Asiel v G (Case C-457/12) EU:C:2014:136 476 SA Binon & Cie v SA Agence et messagerie de la presse (Case 243/83) [1985] ECR 2015 368 SA Brasserie de Haecht v Consorts Wilkin-Janssen (Case 23/67) [1967] ECR 525 373, 377 SA CNL-SUCAL NV v HAG GF AG (Hag II) (Case C-10/89) [1990] ECR I-3711 288 SA Roquette Frères v Council (Case 138/79) [1980] ECR 3333 18, 65, 68, 121, 167 SA Sermes and Directeur des services des douanes de Strasbourg (Case C-323/88) EU:C:1990:299 171 Sacchi (Case 155/73) [1974] ECR 409 308, 338 Säger v Dennemeyer & Co Ltd (Case C-76/90) [1991] ECR I-4221 320, 321, 322 Salerno and others v Commission and Council (Joined Cases 87/77, 130/77, 22/83, 9/84 and 10/84) [1985] ECR 2523 186 Samsung SDI Co Ltd and Others v Commission (Case T-84/13) EU:T:2015:611 373 Sandoz prodotti farmaceutici SpA v Commission (Case C-277/87) [1990] ECR I-45 366 Sarrió SA v Commission (Case C-291/98 P) [2000] ECR I-9991 168 SAT Fluggesellschaft mbH v Eurocontrol (Case C-364/92) [1994] ECR I-43 340 Sayag and SA Zurich v Leduc, Thonnon and SA La Concorde (Case 9/69) [1969] ECR 329 192 Sayn-Wittgenstein v Landeshauptmann von Wien (Case C-208/09) [2010] ECR I-13693 454 Schmid (Case C-516/99) [2002] ECR I-4593 150 Schneider Electric SA v Commission (Case T-310/01) [2002] ECR II-4071 410 Schneider Electric SA v Commission (Case T-351/03) [2007] ECR II-2251 194, 196 Scholz v Opera Universitaria di Cagliari and Cinzia Porcedda (Case C-419/92) [1994] ECR I-505 317 Schul Douane Expediteur BV v Inspecteur der Invoerrechten en Accijnzen, Roosendaal (Case 15/81) [1982] ECR 1409 203 Scotch Whisky Association and Others v Lord Advocate (Case C-333/14) EU:C:2015:845 260 SCP Boscher, Studer et Fromentin v SA British Motors Wright and others (Case C-239/90) [1991] ECR I-2023 281 SDDDA v Commission (Case T-47/96) [1996] ECR II-1559 103 Sea Containers v Stena Sealink [1994] OJ L15/8 395 Secretary of State for the Home Department v Akrich (Case C-109/01) [2003] ECR I-9607 478 Secretary of State for the Home Department v CS (Case C-304/14) EU:C:2016:674 457, 458 Secretary of State for the Home Department v G (Case C-400/12) EU:C:2014:9 498 Secretary of State for the Home Department v NA (Case C-115/15) EU:C:2016:487 458, 488 Secretary of State for the Home Department v Rozanne Banger (Case C-89/17) EU:C:2018:570 478 SELEX Sistemi Integrati SpA v Commission (Case C-113/07 P) [2009] ECR I-2207 340 Service pour le groupement d’acquisitions (SGA) v Commission (Joined Cases T-189/95, T-39/96 and T-123/96) [1999] ECR II-3587 422 Serviços de Comunicações e Multimédia SA v Autoridade da Concorrência (Case C-525/16) EU:C:2017:1020 395 SEVIC Systems AG (Case C-411/03) [2005] ECR I-10805 312 SFEI and others v Commission (Case C-39/93) [1994] ECR 2681 186 Shindler and Others v Council (Case C-755/18 P) EU:C:2019:221 165 Shindler v Council (Case T-458/17) EU:T:2018:838 165 Si.mobil telekomunikacijske storitve d.d. v Commission (Case T-201/11) EU:T:2014:1096 422 Simitzi v Dimos Kos (Joined Cases C-485 and 486/93 [1995] ECR I-2655 229 Singh and Others v Minister for Justice and Equality (Case C-218/14) EU:C:2015:476 484 Sinochem Heilongjiang v Council (Case T-161/94) [1996] ECR II-695 174 SIOT (Case 266/81) EU:C:1983:77 230 Siragusa v Regione Sicilia – Soprintendenza Beni Culturali e Ambientali di Palermo (Case C-206/13) EU:C:2014:126 40

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Skanska Industrial Solutions and Others (Case C-724/17) EU:C:2019:204 432 Skatteverket v Holmen AB (Case C-608/17) EU:C:2019:9 311 Skatteverket v Memira Holding AB (Case C-607/17) EU:C:2019:510 311 Slob v Productschap Zuivel (Case C-236/02) [2004] ECR I-1861 148 Slovak Republic and Hungary v Council (Joined Cases C-643/15 and C-647/15) EU:C:2017:631 21, 65, 170 Slovak Republic v Commission (Joined Cases C-593/15 and C-594/15 P) EU:C:2017:800 165 Slovak Telekom, a.s. v Commission (Case T-851/14) EU:T:2018:929 344, 397 Slovakia v Achmea BV (Case C-284/16) EU:C:2018:158 57, 140 SM v Entry Clearance Officer, UK Visa Section (Case C-129/18) EU:C:2019:248 479 Smanor SA (Case 298/87) [1988] ECR 4489 279 Smith v Meade and Others (Case C-122/17) EU:C:2018:631 78 SNIA v Commission (Case C-448/11) EU:C:2013:801 347 Sociaal Fonds voor de Diamantarbeiders v SA Ch Brachfeld & Sons and Chougol Diamond Co (Diamantarbeiders) (Joined Cases 2 and 3/69) [1969] ECR 211, EU:C:1969:30 87, 228 Società Italiana per l’Oleodotto Transalpino (SIOT) v Ministero delle finanze, Ministero della marina mercantile, Circoscrizione doganale di Trieste and Ente autonomo del porto di Trieste (Case 266/81) [1983] ECR 731 230 Società Italiana Vetro SpA, Fabbrica Pisana SpA and PPG Vernante Pennitalia SpA v Commission (Re Italian Flat Glass) (Joined Cases T-68/89, T-77/89 and T-78/89) [1992] ECR II-1403 363, 393 Società per l’aeroporto civile di Bergamo-Orio al Serio (SACBO) SpA v Commission and Agence exécutive pour l’innovation et les reséaux (Case C-281/14 P) EU:C:2016:46 54 Société Civile Agricole du Centre d’Insémination de la Crespelle v Coopérative d’Elevage et d’Insémination Artificielle du Département de la Mayenne (Case C-323/93) [1994] ECR I-5077 395 Société d’Importation Edouard Leclerc-Siplec v TF1 Publicité SA and M6 Publicité SA (Case C-412/93) [1995] ECR I-179 266, 267 Société de Vente de Ciments et Bétons de l’Est SA v Kerpen & Kerpen GmbH und Co KG (Case 319/82) [1983] ECR 4173 382 Société des produits Bertrand SA v Commission (Case 40/75) [1976] ECR 1 196 Société Générale d’Entreprises Electro-Mécaniques SA (SGEEM) and Etroy v European Investment Bank (Case C-370/89) [1992] ECR I-6211 189 Société Louis Dreyfus & Cie v Commission (Case C-386/96 P) EU:C:1998:193 176 Société Roquette Frères v Commission (Case 26/74) [1976] ECR 677 195 Société Technique Minière (LTM) v Maschinenbau Ulm GmbH (MBU) (Case 56/65) [1966] ECR 235, [1966] ECR 337 357, 372 Society for the Protection of Unborn Children Ireland Ltd v Grogan and others (Case C-159/90) [1991] ECR I-4685 308 Solange I [1974] CMLR 540 83 Solange II [1987] 3 CMLR 225 83 Solvay SA v Commission (Case T-30/91) [1995] ECR II-1775 371 Sony Corporation and Sony Electronics Inc (Case T-762/15) EU:T:2019:515 375 Sony Optiarc Inc and Sony Optiarc America Inc (Case T-763/15) EU:T:2019:517 375 Sopropé – Organizações de Calçado Lda v Fazenda Pública (Case C-349/07) EU:C:2008:746 170 Sot. Lélos kai Sia EE and Others v GlaxoSmithKline AEVE Farmakeftikon Proïonton, formerly Glaxowellcome AEVE (Cases C-466/06 to 478/06) EU:C:2008:504 403 Sotgiu v Deutsche Bundespost (Case 152/73) [1974] ECR 153 316 Sotiropoulou v Council (Case T-531/14) EU:T:2017:297 190 Sozialhilfeverband Rohrbach v Arbeiterkammer Oberösterreich and Österreichischer Gewerkschaftsbund (Case C-297/03) [2005] ECR 4305 90 SpA International Chemical Corporation v Amministrazione delle Finanze dello Stato (Case 66/80) [1981] ECR 1191 160 SpA Marimex v Italian Finance Administration (Case 29/72) [1972] ECR 1309 233 SpA Simmenthal v Commission (Case 92/78) [1979] ECR 777 187

Table of Cases

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Spain and Italy v Council of the European Union (Unitary Patent) (Joined Cases C-274/11 and C-295/11) EU:C:2013:240 36 Spain v Commission (Case C-197/13 P) EU:C:2014:2157 167 Spiegel Online GmbH v Volker Beck (Case C-516/17) EU:C:2019:625 76 Srl CILFIT and Lanificio di Gavardo SpA v Ministry of Health (Case 283/81) [1982] ECR 3415 151, 157 Stadt Wuppertal v Bauer and Willmeroth v Broßonn (Joined Cases C-569/16 and C-570/16) EU:C:2018:871 58, 80 Stadtgemeinde Frohnleiten and Gemeindebetriebe Frohnleiten GmbH v Bundesminister für Land- und Forstwirtschaft, Umwelt und sserwirtschaft (Case C-221/06) [2007] ECR I-9643 226, 235, 236 Staelan v European Ombudsman (Case T-217/11) EU:T:2015:238 193, 194 Star Fruit Company SA v Commission (Case 247/87) [1989] ECR 291 105, 185 Stauder v City of Ulm, Sozialamt (Case 29/69) [1969] ECR 419 57, 83, 139 Steinhoff and Others v European Central Bank (Case T-107/17) EU:T:2019:353 189 Steymann v Staatssecretaris van Justitie (Case 196/87) [1988] ECR 6159 303 Stichting Greenpeace Council (Greenpeace International) and Others v Commission (Case C-321/95 P) EU:C:1998:153 181 Stora Kopparbergs Bergslags v Commission (Case C-286/98 P) EU:C:2000:630 345 Suiker Unie v Commission (Re Sugar Cartel) see Coöperatieve Vereniging ‘Suiker Unie’ UA and others v Commission (Re Sugar Cartel) Sumitomo Chemical Co Ltd and Sumika Fine Chemicals Co Ltd v Commission (Joined Cases T-22/02 and T-23/02) [2005] ECR II-4065 373, 419 Summary Proceedings against Oebel (Case 155/80) [1981] ECR 1993 292 Sweden and Turco v Council (Joined Cases C-39/05 P and C-52/05 P) [2008] ECR I-4723 66 Syndesmos ton en Elladi Touristikon kai Taxidiotikon Grafeion v Ypourgos Ergasias (Case C-398/95) [1997] ECR I-3091 320 Syndicat Départemental de Défense du Droit des Agriculteurs (SDDDA) v Commission see SDDDA v Commission 103 Synetairismos Farmakopoion Aitolias & Akarnanias (Syfait) and Others v GlaxoSmithKline plc and GlaxoSmithKline AEVE (Case C-53/03) [2005] ECR I-4609 150

T T&L Sugars Ltd and Sidaul Açúcares, Unipessoal Lda v Commission (Case C-456/13 P) EU:C:2015:284 177, 178, 180 Tasca (Case 65/75) [1976] ECR 29 260 Tedeschi v Denkavit Commerciale srl (Case 5/77) [1977] ECR 1555 278 Teglgaard and Fløjstrupgård I/S v Fødevareministeriets Klagecenter (Case C-239/17) EU:C:2018:328 48 Teixeira v London Borough of Lambeth and Secretary of State for the Home Department (Case C-480/08) [2010] ECR I-1107 453, 488 Telefónica SA v Commission (Case C-274/12) EU:C:2013:852 180 Telefónica, SA and Telefónica de España, SA v Commission (T-336/07) EU:T:2012:172 400 Telemarsicabruzzo SpA and Others v Circostel, Ministero delle Poste e Telecommunicazioni and Ministero della Difesa (Joined Cases C-320–322/90) [1993] ECR I-393 157 Test Claimants in the FII Group Litigation v Commissioners of Inland Revenue (Case C-446/04) [2006] ECR I-11753 120 Tetra Laval BV v Commission (Case T-80/02) [2002] ECR II-4519 410 Tetra Pak I (BTG licence) [1988] OJ L272/27 404 Tetra Pak International SA v Commission (Tetra Pak II) (Case C-333/94 P) [1996] ECR I-5951 354, 393, 395, 396, 397 Tetra Pak International SA v Commission (Case T-83/91) [1994] ECR II-755 354, 392, 402 Tetra Pak Rausing SA v Commission (Case T-51/89) [1990] ECR II-309 387 The Queen and The Minister for Agriculture, Fisheries and Food and The Secretary of State for Health, ex parte Fedesa and Others (Case C-331/88) EU:C:1990:391 169

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The Queen on the application of Western Sahara Campaign UK v Commissioners for Her Majesty’s Revenue and Customs and Secretary of State for Environment, Food and Rural Affairs (Case C-266/16) EU:C:2018:118 146 The Queen v Minister of Agriculture, Fisheries and Food and Secretary of State for Health, ex parte Fedesa and Others (Case C-331/88) [1990] ECR I-4023 41 The Queen, on the application of Alliance for Natural Health and Nutri-Link Ltd v Secretary of State for Health and The Queen, on the application of National Association of Health Stores and Health Food Manufacturers Ltd v Secretary of State for Health and National Assembly for Wales (Joined Cases C-154/04 and C-155/04) EU:C:2005:449 49 Thieffry v Conseil de l’Ordre des Avocats à la Cour de Paris (Case C-71/76) [1977] ECR 765 320 Tilly-SabcoSAS v Commission (Case C-183/16 P) EU:C:2017:704 70 T-Mobile Netherlands BV, KPN Mobile NV, Orange Nederland NV and Vodafone Libertel NV v Raad van bestuur van de Nederlandse Mededingingsautoriteit (Case C-8/08) [2009] ECR I-4529 372, 373 Toepfer und Getreide-Import Gesellschaft v Commission (Joined Cases 106 and 107/63) [1965] ECR 405 176 Tomášová v Slovenská republika – Ministerstvo spravodlivosti SR and Pohotovosť s.r.o. (Case C-168/15) EU:C:2016:602 119 Tomra Systems ASA and Others v European Commission (Case T-155/06) EU:T:2010:370 399 TopFit e.V. and Biffi v Deutscher Leichtathletikverband e.V. (Case C-22/18) EU:C:2019:497 487 Torfaen Borough Council v B & Q plc (Case C-145/88) [1989] ECR 3851 148, 263, 293 Torresi and Torresi v Consiglio dell’Ordine degli Avvocati di Macerata (Cases C-58/13 and C-59/13) EU:C:2014:2088 153 Toshiba Corp v Commission (Case T-104/13) EU:T:2015:610 373 Toshiba Samsung Storage Technology Corp. and Toshiba Samsung Storage Technology Korea Corp. v European Commission (Case T-8/16) EU:T:2019:522 347, 375 Total Raffinage Marketing v Commission (Case T-566/08) EU:T:2013:423 365 TotalFina/Elf [2001] OJ L143/1 411 Traghetti del Mediterraneo SpA v Italy (Case C-173/03) [2006] ECR I-5177 119 Transocean Marine Paint Association v Commission (Case 17/74) [1974] ECR 1063 167 Transportes Urbanos y Servicios Generales SAL v Administración del Estado (Case C-118/08) [2010] ECR I-635 121 Tréfileurope Sales SARL v Commission (Re Welded Steel Mesh Sector) (Case T-141/89) [1995] ECR II-791 366 Trinseo Deutschland Anlagengesellschaft mbH v Germany, Opinion of AG Saugmandsgaard Øe (Case C-577/16) EU:C:2017:975 92 Trojani v Centre public d’aide sociale de Bruxelles (CPAS) (Case C-456/02) [2004] ECR I-7573 487 Trubowest Handel GmbH and Makarov v Council and Commission (Case C-419/08 P) EU:C:2010:147 196 TWD Textilwerke Deggendorf GmbH v Germany (Case C-188/92) [1994] ECR I-833 178

U UB v Generálny riaditeľ Sociálnej poisťovne Bratislava e.a. (Case C-447/18) EU:C:2019:1098 487 Unibet International Ltd v Nemzeti Adó- és Vámhivatal Központi Hivatala (Case C-49/16) EU:C:2017:491 308 Unilever Italia SpA v Central Foods SpA (Case C-443/98) [2000] ECR I-7535 96, 119 Unión de Pequeños Agricultores v Council (Case C-50/00 P) [2002] ECR I-6677 177 Union départementale des syndicats CGT de l’Aisne v SIDEF-Conforama, Société Arts et Meubles, and Société JIMA (Case C-312/89) [1991] ECR I-997 263 Union française de l’express (Ufex), DHL International, Service CRIE and May Courier v Commission (Case T-77/95) [2000] ECR II-2167 422 Union royale belge des sociétés de football association ASBL v Bosman, Royal club liégeois SA v Bosman and others and Union des associations européennes de football (UEFA) v Bosman (Case C-415/93) [1995] ECR I-4921, EU:C:1995:463 156, 316, 319, 321 Union syndicale Solidaires Isère v Premier ministre and Others (Case C-428/09) EU:C:2010:612 302 United Brands Company and United Brands Continentaal BV v Commission (Case 27/76) [1978] ECR 207 350, 352, 353, 355, 356, 391, 392, 393, 400 United Kingdom v Commission (Case C-180/96) [1998] ECR I-2265 295

Table of Cases

United Kingdom v Council (Case 68/86) EU:C:1988:85 United Kingdom v Council (Case C-84/94) EU:C:1996:431 United Kingdom v Council (Re Working Time Directive) (Case C-84/94) [1996] ECR I-5755 United Kingdom v European Parliament and Council of the European Union (Case C-66/04) [2005] ECR I-10573 United Kingdom v Parliament and Council (European Securities and Markets Authority) (Case C-270/12) EU:C:2014:18

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167 171 38, 41 209 48

V Vaditrans BVBA v Belgium (Case C-102/16) EU:C:2017:1012 136 VALE Építési kft (Case C-378/10) EU:C:2012:440 312 Van Binsbergen v Bestuur van den Bedrijfsvereniging voor de Metaalnijverheid (Case 33/74) [1974] ECR 1299 316 Van Duyn v Home Office (Case 41/74) [1974] ECR 1337 86, 89, 494 van Landewyck Sàrl v Commission (FEDETAB) (Joined Cases 209 to 215 and 218/78) [1980] ECR 3125 365, 368 Van Zuylen frères v Hag AG (Hag I) (Case 192/73) [1974] ECR 731 288 Vaneetveld v Le Foyer SA and Le Foyer SA v Fédération des Mutualités Socialistes et Syndicales de la Province de Liège (Case C-316/93) [1994] ECR I-763 157 Vantaan kaupunki v Skanska Industrial Solutions Oy and Others (Case C-724/17) EU:C:2019:204 347 Vatsouras and Koupatantze v Arbeitsgemeinschaft (ARGE) Nürnberg 900 (Joined Cases C-22/08 and C-23/08) [2009] ECR I-4585 489 VBBB/VBVB [1982] OJ L54/36 386 VBVB & VBBB v Commission (Re Dutch Books) (Joined Cases 43/82 and 63/82) [1984] ECR 19 360, 373 VEBA/VIAG [2001] OJ L188/1 407 Verband Sozialer Wettbewerb eV v Clinique Laboratoires SNC and Estée Lauder Cosmetics GmbH (Case C-315/92) [1994] ECR I-317 251 Vereeniging van Cementhandelaren v Commission (Re Cement Cartel) (Case 8/72) [1972] ECR 977 359, 373 Verein gegen Unwesen in Handel und Gewerbe Köln eV v Mars GmbH (Case C-470/93) [1995] ECR I-1923 267, 291 Vereinigte Familiapress Zeitungsverlags- und vertriebs GmbH v Heinrich Bauer Verlag (Case C-368/95) [1997] ECR I-3689 267, 293 Vereniging van Exporteurs in Levende Varkens and others and Nederlandse Bond van Waaghouders van Levend Vee and others v Commission (Joined Cases T-481/93 and T-484/93) EU:T:1995:209 195 Vereniging van Samenwerkende Prijsregelende Organisaties in de Bouwnijverheid and others v Commission (Case T-29/92) [1995] ECR II-289 383 Viho Europe BV v Commission (Case C-73/95 P) [1996] ECR I-5457 345, 346 Viho Europe BV v Commission (Case T-102/92) [1995] ECR II-17 345 Virgin/British Airways [2000] OJ L30/1) 354, 392 Vitamins Cartel [2003] OJ L6/1 373, 419 Völk v SPRL Ets J Vervaecke (Case 5/69) [1969] ECR 295 357, 376 Volkswagen AG v Commission (Case C-338/00) [2003] ECR I-9189 367 Volkswagen AG v Commission (Case T-62/98) [2000] ECR II-2707 367 Von Colson and Kamann v Land Nordrhein-Westfalen (Case 14/83) [1984] ECR 1891 77, 93, 95, 140 Von Hoessle v Court of Auditors (Case T-19/90) [1991] ECR II-615 186

W W Cadsky SpA v Istituto Nazionale per il Commercio Estero (Case 63/74) [1975] ECR 281 230, 231 W J G Bauhuis v The Netherlands (Case 46/76) [1977] ECR 5 278 Walrave and Koch v Association Union Cycliste Internationale, Koninklijke Nederlandsche Wielren Unie and Federación Española Ciclismo (Case 36/74) [1974] ECR 1405 303, 316 Walter Rau Lebensmittelwerke v De Smedt PVBA (Case 261/81) [1982] ECR 3961 262, 264, 279 Wanadoo España vs Telefónica (Case COMP/38.784) (C (2007) 3196 final) 400

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Wanadoo Interactive (COMP/38.223) 399 Watson and Belmann (Case 118-75) [1976] ECR 1185 481 Watson and Others (Case C-698/15) EU:C:2016:70 158 Weigel and Weigel v Finanzlandesdirektion für Vorarlberg (Case C-387/01) [2004] ECR I-4981 235 Werhahn Hansamühle and others v Council (Joined Cases 63 to 69/72) [1973] ECR 1229 189 Western Sahara Campaign UK v Commissioners for Her Majesty’s Revenue and Customs and Secretary of State for Environment, Food and Rural Affairs (Case C-266/16) EU:C:2018:118 139 Wieland-Werke AG v Commission (Case T-116/04) EU:T:2009:140 365 Wightman and Others v Secretary of State for Exiting the European Union (Case C-621/18) EU:C:2018:999 128, 159 Wilson v Ordre des avocats du barreau de Luxembourg (Case C-506/04) EU:C:2006:587 143 Winner Wetten GmbH v Bürgermeisterin der Stadt Bergheim (Case C-409/06) [2010] ECR I-8015, EU:C:2010:503 77, 308 WJG Bauhuis v The Netherlands (Case 46/76) [1977] ECR 5 228 Wood Pulp Cartel [1985] OJ L85/1 370, 418 Wörsdorfer, née Koschniske v Raad van Arbeid (Case 9/79) EU:C:1979:201 154 Wunenburger v Commission (Case C-362/05 P) EU:C:2007:322 185 Wünsche Handelsgesellschaft GmbH & Co v Germany (Case C-69/85) [1986] ECR 947 157

X X (Case C-437/12) EU:C:2013:857 X v Inspecteur van Rijksbelastingdienst and van Dijk v Staatssecretaris van Financiën EU:C:2015:564

235 153

Y Ymeraga and Others v Ministre du Travail, de l’Emploi et de l’Immigration (Case C-87/12) EU:C:2013:291 Ynos kft v János Varga Case C-302/04) EU:C:2006:9

456, 475 156

Z Zabala Erasun, Encabo Terrazos and Casquero Carrillo v Instituto Nacional de Empleo (Joined Cases C-422–424/93) [1995] ECR I-1567 157 Zanussi SpA [1978] OJ L322/36 358 Zentralbetriebsrat der gemeinnützigen Salzburger Landeskliniken, ‘SALK’ (Case C-514/12) EU:C:2013:799 319 Zhu and Chen v Secretary of State for the Home Department (Case C-200/02) [2004] ECR I-9925, EU:C:2004:639 449, 483 Zinc Producer Group [1984] OJ L220/27 374, 419 ZS ‘Ezernieki’ v Lauku atbalsta dienests (Case C-273/15) EU:C:2016:364 77 Zuckerfabrik Süderdithmarschen AG v Hauptzollamt Itzehoe and Zuckerfabrik Soest GmbH v Hauptzollamt Paderborn (Joined Cases C-143/88 and 92/89) [1991] ECR I-415 151 ZZ v Secretary of State for the Home Department (Case C-300/11) EU:C:2013:363 499

Table of Legislation

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TABLE OF LEGISLATION EU treaties, international agreements and conventions, and declarations Accession Treaties 10 Agreement on the European Economic Area 214, 310, 420 Agreement on the Withdrawal of the UK from the EU and EURATOM 2018 14th November 14 Political Statement 15 Protocol on Gibraltar 14 Protocol on Ireland/Northern Ireland 14 Protocol on the Sovereign Base Areas in Cyprus 14 Agreement on the Withdrawal of the UK from the EU and EURATOM 2019 17th October 14 Art 126 15 Art 132 15 Political Statement 15 Protocol on Ireland/Northern Ireland (revised) 14 Ankara Association Agreement, Additional Protocol 7 Charter of Fundamental Rights of the European Union 9, 13, 43, 44, 57–9, 80, 83, 87, 169, 170, 457 Art 7 451, 459, 496 Art 21 58, 97 Art 24 451 Art 24(2) 459 Art 27 58 Art 31(2) 58 Art 39 447, 468 Art 40 447, 468 Art 41 447, 466 Art 41(4) 467, 468 Art 42 65, 447, 468 Art 43 447, 466, 468 Art 44 447, 466, 468 Art 45 447 Art 46 447, 468 Art 47(1) 178 Art 50 87 Art 51 57, 58 Art 52(3) 58 Charter of Social Rights 1989 205 Comprehensive Economic and Trade Agreement (CETA) ([2017] OJ L11/23) 216 Convention on the Rights of Persons with Disabilities 60

EC Treaty (TEC) 10 Art 2 203 Art 3(1)(c) 203 Art 3(1)(g) 203, 337, 381 Art 3(1)(h) 203 Art 3(g) 381 Art 8 449 Art 8(1) 451 Art 8a 449 Art 8b 449 Art 8b(1) 461 Art 8b(2) 461 Arts 8c–8e 449 Art 12 227, 454 Art 18(1) 453 Art 26 225 Art 27 225 Art 28 257, 263, 272, 274, 284, 285, 296 Art 29 274 Art 30 248, 257, 281, 284, 285, 296 Art 34 273 Art 36 273 Art 52 307, 311 Art 59 307 Art 61 472, 473 Arts 62–69 472 Art 81 356, 382, 405, 417, 421, 435 Art 81(3) 383 Art 82 350, 356, 382, 392, 402, 405, 417, 421, 435 Art 94 210 Art 95 209, 210 Art 195 466 Art 228 113, 132 ECSC Treaty 1951 5, 7, 44, 77, 202, 405 Art 66 405 Art 66(7) 391 EEC Treaty (TEEC) 5, 8, 44, 76, 77, 85, 201, 202, 204, 205, 337, 414, 471 Part 3, Ch 1 337 Art 3(f) 337 Art 3(g) 381 Art 5 80 Art 8 202 Art 8a 203, 204 Art 9 232, 233

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EEC Treaty (TEEC) – continued Art 10 233 Art 11 233 Art 12 85, 137, 224, 229, 232, 233 Art 13 232, 233 Art 14 224, 233 Art 15 233 Art 16 232, 233 Art 30 251–3, 255, 257, 259, 263, 265, 266, 277, 280, 293 Art 34 273 Art 36 232, 290–2 Art 48 302 Art 48(2) 302 Art 48(4) 330 Arts 49–51 302 Art 85 186, 359, 363, 368, 376, 378, 379, 393, 417, 421 Art 85(1) 417 Art 85(3) 383, 417, 421 Art 86 186, 354, 393, 417, 421 Art 95 240, 242, 277 Art 99 210 Art 100 205, 210, 211 Art 100a 204 Art 102a 204 Art 118a 204 Art 118b 204 Art 119 87 Art 130a–130t 205 Art 169 85 Art 175 186 Art 177 85 Art 189 91 Art 228(1) 166 Art 235 205 EURATOM Treaty 8, 44, 202 European Convention on Human Rights (ECHR) 3, 57– 9, 80, 85, 127, 134, 448 Art 8 452, 475, 496 Art 10 296 Protocol 4 Art 2(1) 480 EU–Swiss Agreement on the free movement of persons ([2002] OJ L114/6) 310 Fiscal Compact see Treaty on Stability, Coordination and Governance in the Economic and Monetary Union 2012 GATT 1947 60, 230 Joint Declaration on Practical Arrangements for the CoDecision Procedure ([2007] OJ C145/5) 64, 67 Laeken Declaration 2001 8 Maastricht Treaty 1992 8, 9, 10, 13, 44, 133, 136, 204, 205, 295, 337, 447, 449, 461, 465, 466, 472

Maastricht Treaty – continued 1992recital 8 447 Art 8 447 Social Chapter 13 Merger Treaty 1965 8, 25 Ombudsman Statute Art 3(2) 467 Art 3(3) 467 Art 3(6) 467 Art 3(7) 467 Rome Declaration of 26 March 2017 9 Schengen Agreement 1985 8, 13, 471, 472 Schengen Convention 1990 8, 471, 472 Single European Act 1986 8, 26, 28, 127, 134, 201–5, 210, 221, 227, 277 Art 13 203 Art 14 204 Art 15 204 Art 18(3) 204 Stability and Growth Pact 1997 10, 11 Statute of the Court of Justice see Treaty on the Functioning of the European Union (TFEU) (consolidated), Protocol No 3 on the Statute of the Court of Justice of the European Union Treaties of Rome 1957 see EEC Treaty (TEEC) and EURATOM Treaty Treaty of Amsterdam 1997 8, 13, 37, 451, 465, 467, 471, 472–3 Second Protocol 473 Treaty Establishing a Constitution for Europe (draft) 44 Article III-130(2) 223 Treaty on European Union (TEU) (consolidated) 8, 43– 5, 61, 465 Art 1 65 Art 2 6, 17, 56, 57, 69, 128, 143 Art 3 45 Art 3(2) 45, 471 Art 3(3) 45, 204 Art 3(4) 45 Art 3(5) 45 Art 4(3) 80–1, 105, 144, 250 Art 5 39 Art 5(1) 37, 46, 56 Art 5(2) 33, 167 Art 5(3) 37 Art 5(4) 40 Art 6(1) 57 Art 6(2) 59, 134 Art 6(3) 57, 59, 76, 294 Art 7(1) 69 Art 7(2) 69 Art 7(4) 69 Art 7(5) 69 Title II (Arts 9–12) 462

Table of Legislation

Treaty on European Union (TEU) (consolidated) – continued Art 9 447, 449, 451, 460, 467 Art 10 17 Art 10(1) 17 Art 10(4) 26 Art 11 18, 462 Art 11(3) 18 Art 11(4) 18, 462, 468 Art 12 18 Art 13 17, 19, 29 Art 13(1) 45, 163, 164 Art 13(2) 21, 65, 139, 163 Art 14 26 Art 14(2) 26 Art 14(3) 17, 26 Art 15 28, 65 Art 15(1) 28 Art 15(2) 28 Art 15(4) 28 Art 15(5) 28 Art 15(6) 28 Art 16 23 Art 16(1) 24 Art 16(2) 24 Art 16(3) 25 Art 16(4) 26 Art 16(6) 24 Art 16(7) 25 Art 16(9) 24 Art 17 19 Art 17(1) 21, 54, 101 Art 17(2) 21 Art 17(3) 19 Art 17(4) 19 Art 17(6) 21, 164 Art 17(7) 20 Art 17(8) 21 Art 19 128 Art 19(1) 56, 127–8, 180 Art 20 37, 54 Art 20(2) 473 Art 22 54 Art 24(1) 139 Art 29 54 Art 31 54 Art 32 211 Art 47 33, 59 Art 48 177 Art 48(2) 28, 46 Art 48(3)–(5) 46 Art 48(6) 28, 46, 146 Art 48(7) 46 Art 49 6 Art 49(1) 69 Art 49(2) 69 Art 50 14, 128, 159 Art 50(2) 14, 69

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Treaty on European Union (TEU) (consolidated) – continued Art 51 46 Art 53(1) 467 Treaty on the Functioning of the European Union (TFEU) (consolidated) 9–10, 43–5, 61, 79, 138, 146, 179, 465 recitals 4, 5 213 Art 2 17, 36, 46 Art 2(2) 36 Art 2(3) 35, 36 Art 2(5) 35, 36 Art 3 35, 36, 46 Art 4 35, 36, 46 Art 4(3) 36 Art 4(4) 36 Art 5 35, 36, 46 Art 6 35, 36, 46 Art 14 27 Art 15(2) 65 Art 15(3) 468 Art 18 46, 170, 321, 451, 452, 454, 485–7, 491, 492 Art 19 143 Art 19(1) 97, 139, 143, 170 Art 20 449, 451, 454–60 Art 20(1) 447, 449, 451, 455 Art 20(2) 451 Art 21 449, 454, 455, 458, 475, 477–8, 492, 501 Art 21(1) 451, 453, 473, 476–8 Art 22 449, 451 Art 22(1) 461, 468 Art 22(2) 461, 468 Art 23 449, 451 Art 23(1) 465, 468 Art 24 449, 451, 462, 466 Art 24(1) 462, 468 Art 24(2) 466, 468 Art 24(3) 466, 468 Art 24(4) 467, 468 Art 25 245, 449 Art 26 209, 245, 288 Art 26(2) 203, 223 Art 27 204, 245 Art 28 226, 245 Art 28(1) 225 Art 29 225, 246 Art 30 85, 137, 225, 227–30, 233–7, 246, 298 Art 31 225, 246 Art 32 225, 246 Art 33 246 Art 34 228, 245, 247–55, 257–9, 261, 263, 265–70, 272, 274, 276–8, 284–90, 293, 294, 297–9 Art 35 245, 247–8, 250, 252, 272–4, 276–8, 286, 289, 298 Art 36 211, 213, 230, 245, 246, 251–3, 256, 257, 269–70, 273, 277–9, 281–2, 284–9, 291–2, 294, 296–9, 493 Art 37 245

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Treaty on the Functioning of the European Union (TFEU) (consolidated) – continued Art 38(1) 226 Art 45 46, 89, 301, 302, 304, 305, 316, 319, 329, 333 Art 45(1) 301 Art 45(2) 306, 315, 317, 318, 321 Art 45(3) 303, 304, 492 Art 45(4) 328, 329, 332, 333 Arts 46–47 301, 302 Art 48 301, 302, 489 Art 49 305, 307, 309–12, 316, 319, 331, 333 Art 49(1) 321 Art 49(2) 306, 315, 318 Art 51 313, 328, 332 Art 51(1) 331, 333 Art 52(1) 492 Art 53 212 Art 53(1) 210, 322 Art 54 310 Art 54(2) 310 Art 56 307, 309, 316, 319, 333 Art 56(1) 307 Art 56(2) 310 Art 57 308, 309 Art 57(1) 307 Art 57(2) 308, 321 Art 57(3) 307, 315 Art 62 310, 322, 328, 331, 332 Part III, Title V (Arts 67–89) 159 Art 67 473 Art 67(2) 471 Art 68 473 Arts 69–76 473 Art 77 473 Art 77(3) 473 Arts 78–81 473 Art 81(3) 473 Art 82 209, 473 Art 83 209, 473 Art 83(1) 498 Arts 84–86 473 Art 86(1) 37, 54, 473 Art 87 473 Art 87(3) 473 Art 88 473 Art 89 473 Art 91 209 Art 101 186, 287, 338, 342, 345, 350, 356, 359, 363–90, 393, 394, 402, 414, 415, 418, 421, 422, 426–32, 434–5, 437, 443 Art 101(1) 346, 350, 356, 357, 363–5, 367–8, 370, 372, 373, 376, 377, 381–3, 385, 386, 389, 408, 417, 429, 432 Art 101(2) 381–2, 429 Art 101(3) 350, 363, 378, 381–4, 386–7, 389, 408, 417, 421, 429

Treaty on the Functioning of the European Union (TFEU) (consolidated) – continued Art 102 186, 338, 346, 349, 353–4, 356–7, 359, 363, 365, 385, 387, 391–8, 402, 404, 414, 416, 417, 419, 421, 422, 426–31, 437, 438, 443 Art 103 209 Art 103(2) 387 Art 105(3) 387 Art 106(1) 338 Art 106(2) 338 Art 110 233, 234–45 Art 110(1) 240, 243 Art 110(2) 243 Art 113 210 Part III, Title VII, Ch 3 (Arts 114–118) 209 Art 114 51, 204, 209, 210, 277, 288 Art 114(1) 209, 210, 288 Art 114(2) 210, 288 Art 114(3) 289 Art 114(4) 210, 289 Art 114(5) 210 Art 114(7) 210 Art 114(10) 210, 289 Art 115 51, 210 Art 119 204 Art 120 10 Art 121 24 Art 121(1) 10 Art 122–124 204 Art 125 136, 204 Art 126 24 Art 127 204 Art 127(1) 10 Arts 128–135 204 Art 136 146, 204 Art 137 204 Art 138 204 Art 139 204 Art 139(1) 10 Art 140 204 Art 140(1) 10 Arts 141–144 204 Art 145 210 Art 150 210 Art 150(1) 210 Arts 151–155 204 Art 156 204 Art 156(1) 210 Art 157 87, 204 Art 157(1) 451 Art 158 112, 137, 204 Art 159 112, 137, 204 Art 160 204 Art 161 204 Art 173(2) 211 Art 173(3) 211 Arts 174–190 205

Table of Legislation

Treaty on the Functioning of the European Union (TFEU) (consolidated) – continued Art 191 205, 209 Art 191(2) 294 Art 192 205 Art 193 205 Art 206 225 Art 207(1) 225 Art 207(3) 23 Art 216 59 Art 216(1) 34 Art 216(2) 91 Art 218 23, 69, 167 Art 218(6) 68 Art 218(11) 129, 130, 133, 139 Art 220 23 Art 223 26 Art 223(1) 26, 461 Art 224 26 Art 225 26 Art 225(2) 27 Art 226 26, 27 Art 227 26, 27, 466 Art 228 26, 28, 466 Art 228(1) 466 Art 228(2) 128, 466 Art 228(4) 466 Art 229 26 Art 230 26, 27 Art 231 26 Art 232 26, 230 Art 233 26, 27 Art 234 21, 26 Art 236 24 Art 237 23 Art 238 23, 25 Art 238(2) 26 Art 238(4) 25 Art 239 23 Art 240 23, 25 Art 241 23, 24 Art 242 23 Art 243 23 Art 244 19 Art 245 19, 20 Art 245(2) 128 Art 246 19 Art 247 19, 21, 128 Arts 248–250 19 Arts 251–255 128 Art 256 128, 134, 138 Art 256(1) 129, 130, 131 Art 256(3) 145 Art 257 128, 135, 138 Art 258 53, 85, 101–8, 110, 112, 115–17, 123, 128, 130, 138, 155, 185, 187, 293 Art 259 53, 101, 113, 116, 117, 128, 130, 138 Art 260 53, 101, 111, 113, 116, 117, 128, 138

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Treaty on the Functioning of the European Union (TFEU) (consolidated) – continued Art 260(1) 107, 112, 116, 117, 133 Art 260(2) 107, 108, 112–14, 116 Art 260(3) 55, 107, 108, 112, 114–16 Arts 261–262 128, 138 Art 263 27, 30, 34, 37, 39, 46, 47, 108, 128, 130, 134, 135, 138, 146, 151, 163, 164, 168, 172, 173, 178–80, 182, 184–8, 190 Art 263(1) 138, 163 Art 263(2) 166, 173, 178, 186 Art 263(3) 173 Art 263(4) 134, 138, 173, 180, 181, 197 Art 263(6) 171, 186 Art 264 128, 138, 182 Art 265 27, 128, 130, 135, 138, 163, 183–6, 188, 190 Art 265(2) 190 Art 266 128, 138, 161, 182, 183, 185, 186, 187 Art 266(1) 133 Art 267 39, 85, 97, 120, 128–30, 133, 138, 143–5, 147–9, 151–2, 155, 157, 178, 179, 437 Art 267(1) 145 Art 267(2) 155 Art 267(3) 150 Art 268 128, 135, 138, 188 Art 269 138 Art 270 128, 138 Arts 271–272 128, 138 Art 273 128, 130, 138 Art 274 128, 138 Art 275 128, 138, 139 Art 276 128, 138 Art 277 128, 138, 163, 180, 186, 187 Art 278 128, 133, 138 Art 279 110, 111, 128, 133, 138 Art 280 128 Art 281 128 Art 282–286 29 Art 286(1) 29 Art 286(6) 128 Art 287 29 Art 288 44, 47, 51–5, 61, 89, 91, 94 Art 288(2) 87 Art 289 21, 47, 48, 66, 68 Art 289(1) 50, 67 Art 289(2) 50, 68 Art 289(3) 63 Art 289(4) 68 Art 290 22, 47, 48, 50, 69, 179 Art 290(1) 22 Art 290(2) 22 Art 291 47, 48, 49, 50 Art 291(2) 22, 69–70 Art 291(3) 22, 70 Art 294 66, 67 Art 295 64 Art 296 50, 51 Art 296(1) 51

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Treaty on the Functioning of the European Union (TFEU) (consolidated) – continued Art 296(2) 50 Art 297 56, 172 Art 297(2) 54 Art 300 30 Arts 301–304 30 Arts 305-309 30 Art 314 27, 69 Art 319 29 Arts 326–328 37 Art 329(1) 37, 473 Art 340 135, 163, 183, 188, 189, 194 Art 340(1) 187 Art 340(2) 187, 191, 197, 198 Art 340(3) 188 Art 345 285 Art 352 35, 51, 69, 134 Art 352(1) 34–5 Art 352(3) 35 Art 352(4) 35 Art 354 69 Declaration No 1 concerning the Charter of Fundamental Rights of the European Union 47, 57, 58 Declaration No 17 concerning Primacy 47, 84–5 Declaration No 18 in Relation to the Delimitation of Competences 47 Protocol No 1 on the Role of National Parliaments in the European Union 38, 46, 47 Protocol No 2 on the Application of the Principles of Subsidiarity and Proportionality 30, 37–9, 46, 47 Art 1 37 Art 9 39 Protocol No 3 on the Statute of the Court of Justice of the European Union 128, 131 Art 3 128 Art 16 128 Art 23 151 Art 23a 151, 158 Art 46 190 Art 58a 129 Protocol No 4 on the Statute of the European System of Central Banks and of the European Central Bank 29 Protocol No 8 relating to Article 6(2) of the Treaty on European Union on the Accession of the Union to the European Convention on the Protection of Human Rights and Fundamental Freedoms 134 Protocol No 20 on the Application of Certain Aspects of Article 26 of the Treaty on the Functioning of the European Union to the United Kingdom and to Ireland 13 Protocol No 21 on the Position of the United Kingdom and Ireland in Respect of the Area of Freedom, Security and Justice 13, 473 Protocol No 22 on the Position of Denmark 473

Treaty on the Functioning of the European Union (TFEU) (consolidated) – continued Protocol No 25 on the Exercise of Shared Competence 36 Protocol No 30 on the Application of the Charter of Fundamental Rights of the European Union to Poland and to the United Kingdom 13, 47, 58 Art 1(1) 58 Treaty of Lisbon 2007 3, 9, 10, 13, 14, 18, 19, 21, 24, 27, 28, 30, 35, 42, 45, 57, 66, 68, 69, 107, 113, 127, 179, 204, 223, 460, 462, 471–3 Treaty of Nice 2000 8, 21 Treaty of Paris 1951 see ECSC Treaty 1951 Treaty of Rome 1957 see EEC Treaty (TEEC) and EURATOM Treaty Treaty on Stability, Coordination and Governance in the Economic and Monetary Union 2012 10–12 Title III 11 Title IV 11 Title V 11 United Nations Convention on Contracts for the International Sale of Goods 59 Vienna Convention 1961 465 Vienna Convention 1963 465 Vienna Convention on the Law of Treaties 1969 Arts 31–33 136 World Trade Organization (WTO) Agreement 59, 60 Rules of Procedure Rules of Procedure of the Commission 2011 20 Rules of Procedure of the Court of Justice 2012 128 Title III, chapter 2 (Arts 8–14) 158 Title III, chapter 3 (Arts 15–16) 158 Art 60(1)–(2) 132 Art 83 133 Art 83(2) [now 160(3)] 111 Art 94 156 Art 99 153, 157 Art 105 158 Art 106 158 Art 107(2) 159 Art 107(3) 159 Art 108 159 Art 109(6) 159 Art 112 159 Rules of Procedure of the Court of Justice 2019 amendments 129, 132 Rules of Procedure of the European Parliament 2012 Rules of Procedure of the European Parliament 2020 Chapter 3, s 3 64 Rules of Procedure of the General Court 128, 134 Art 13 134 Art 15 134 Art 30 134 Art 58(1)(a) 172 Art 59 171

Table of Legislation

Interinstitutional agreements Framework Agreement on Relations between the European Parliament and the European Commission ([2010] OJ L304/47) 55, 64 Interinstitutional Agreement on Better Law-Making ([2016] OJ L13/1) 55, 64, 66 Annex ‘Common Understanding between the European Parliament, the Council and the Commission on Delegated Acts’ 69 Interinstitutional Agreement on Budgetary Discipline, on Cooperation in Budgetary Matters and on Sound Financial Management (2013) 64 Commission notices and guidance De Minimis Notice (1970) 376 De Minimis Notice (1986) 376 De Minimis Notice (1997) 376, 378 para 9 376 Notice on the definition of relevant market for the purposes of Community competition law ([1997] OJ C372/5) 55, 349, 350, 354, 392 para 7 350 para 8 353 paras 15–24 352 para 28 355 paras 44–50 355 para 53 392 De Minimis Notice (2001) 376 Guidelines for the Cooperation between CEN, CENELEC and ETSI, the European Commission and EFTA ([2003] OJ C91/04) 218 Guidance on the Commission’s enforcement priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings ([2009] OJ C45/2) 391–2, 397 para 15 392 para 19 397 para 30 403 Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of concentrations between undertakings ([2004] OJ C31/5) 406, 409–10 para 8 410 para 10 410 para 11 410 Notice on cooperation within the Network of Competition Authorities ([2004] OJ C101/43) 427 Notice on the co-operation between the Commission and the courts of the EU Member States in the application of Articles 81 and 82 EC ([2004] OJ C101/54) 428 Notice on the handling of complaints by the Commission under Articles 81 and 82 of the EC Treaty ([2004] OJ C101/65) 429 para 28 422

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Notice on informal guidance relating to novel questions concerning Articles 81 and 82 of the EC Treaty that arise in individual cases (guidance letters) ([2004] OJ C101/78) 421 Guidelines on the effect on trade concept contained in Articles 81 and 82 of the Treaty ([2004] OJ C101/81) 356–8 para 3 356 para 4 356 para 12 356 para 16 357 para 20 358 para 23 357 para 25 358 paras 33–35 358 para 37 358 para 38 358 para 40 358 para 41 358 para 43 358 para 45 359 para 48 359 para 52 359 paras 77–99 360 Guidelines on the application of Article 81(3) of the Treaty ([2004] OJ C101/97) 364, 372, 382, 384 para 1 382 para 13 364 para 20 372 para 21 373 para 24 376 para 32 382 para 33 382 para 51 384 para 79 386 Notice on immunity from fines and reduction of fines in cartel cases ([2006] OJ C298/17) 427 Consolidated Jurisdictional Notice under Council Regulation (EC) No 139/2004 on the control of concentrations between undertakings ([2008] OJ C95/01) 406 para 7 406 para 94 407 Guidelines on the assessment of non-horizontal mergers under the Council Regulation on the control of concentrations between undertakings ([2008] OJ C265/7) 406 Notice on remedies acceptable under Council Regulation (EC) No 139/2004 and under Commission Regulation (EC) No 802/2004 ([2008] OJ C267/01) 410 Guidelines on Vertical Restraints ([2010] OJ C130/01) 380, 390 para 6 380 para 24 380 Supplementary guidelines on vertical restraints in agreements for the sale and repair of motor vehicles and for the distribution of spare parts for motor vehicles ([2010] OJ C138/05) 390

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Guidelines on the applicability of Article 101 of the Treaty on the Functioning of the European Union to horizontal co-operation agreements ([2011] OJ C11/01) 379, 390 para 2 379 para 3 379 Guidelines on the application of Article 101 TFEU to technology transfer agreements ([2014] OJ C89/03) 390 Notice on agreements of minor importance which do not appreciably restrict competition under Article 101(1) of the Treaty on the Functioning of the European Union (De Minimis Notice) ([2014] OJ C291/1) 356, 376 para 7 378 para 8 376, 377 para 9 376, 377 para 10 377 para 11 376, 377 para 12 377 Commission Notice The ‘Blue Guide’ on the implementation of EU products rules 2016 ([2016] OJ C272/1) 216, 217 Opinions Opinion 1/91 Agreement between the Community and the Countries of EFTA Relating to the EEA EU:C:1991:490 45, 139 Opinion 2/94 Accession by the Community to the ECHR [1996] ECR I-1759 35, 134 Opinion 1/09 Agreement on Creation of a Unified Patent Litigation System EU:C:2011:123 139–40, 143, 144 Opinion 1/13 EU:C:2014:2303 129 Opinion 2/13 Accession of the European Union to the ECHR EU:C:2014:2454 9, 75, 128, 134, 136, 140, 144, 153 Opinion 1/15 EU Canada PNR Agreement EU:C:2017:592 139 Opinion 1/17 Comprehensive Economic and Trade Agreement between Canada and the European Union and its Member States EU:C:2019:341 75, 139, 145 Decisions Decision 76/787/ECSC, EEC, EURATOM ([1976] OJ L278/1) 460–1 Decision 88/591/EEC 134 Decision 90/683/EEC 217 Decision 93/465/EEC 217 Decision 95/553/EC 466 Decision 3052/95/EC 213 Decision 96/239/EC 295 Decision 2003/174/EC 35 Decision 2004/752/EC 135 Decision 768/2008/EC 217, 247 Decision 2013/52/EU 37 Decision 1386/2013/EU Living well, within the limits of our planet 56 Decision 2014/866/EU 35

Decision 2014/955/EU 49 Decision 2016/1859/EU 35 Decision 2017/EU/EURATOM 3 May 2017 14 Decision 2020/135/EU (entry into force of Withdrawal Agreement) 14 Decision 5870/20/EC Authorising the Opening of Negotiations with the UK for a New Partnership Agreement 15 Decision 1/95 of the EC–Turkey Association Council of 22 December 1995 Arts 5-7 214 Directives Directive 64/221/EEC 474, 494, 496 Art 3 494 Art 3(1) 89, 494 Directive 68/151/EEC (company) 94 Directive 68/360/EEC 474, 481 Directive 70/50/EEC 253–4 Art 2 253 Art 3 253, 254 Directive 70/311/EEC Art 2a 293 Directive 72/461/EEC (trade in fresh meat) 232 Directive 73/148/EEC 474, 481 Art 1 475 Directive 75/362/EEC 323 Directive 75/363/EEC 323 Directive 76/207/EEC (equal treatment) 89, 93 Directive 76/768/EEC 212 Directive 77/249/EEC 307, 313, 323, 326 Art 4(1) 323 Art 4(2) 323 Art 5 323 Directive 77/452/EEC 323 Directive 77/453/EEC 323 Directive 78/686/EEC 323 Directive 78/687/EEC 323 Directive 78/1026/EEC 323 Directive 78/1027/EEC 323 Directive 80/154/EEC 323 Directive 80/155/EEC 323 Directive 80/777/EEC 82 Directive 81/389/EEC 232 Directive 83/189/EEC 96, 104, 245 Art 9 96 Directive 85/337/EEC 95 Directive 85/384/EEC 323 Art 3 323 Art 4 323 Directive 85/432/EEC 323 Directive 85/433/EEC 323 Directive 88/378/EEC 218 Directive 89/48/EEC 324, 329 Directive 89/665/EEC 116, 117 Directive 90/366/EEC 474 Directive 90/385/EEC 218 Directive 92/28/EEC 211

Table of Legislation

Directive 92/51/EEC 324, 329 Art 3 324 Art 4(1) 324, 325 Directive 92/79/EEC 238 Directive 93/42/EEC 218 Directive 93/59/EEC 256 Directive 93/96/EEC 474, 486 Directive 93/109/EC 461 Art 3 461 Art 4 461 Art 6 461 Art 7 461 Directive 94/80/EC 461 recital 6 462 Directive 95/46/EC 313 Directive 95/59/EC 238 Directive 96/71/EC (posted workers) 38, 313 Directive 97/7/EC 274 Directive 98/5/EC 323, 326 Art 2 324 Art 3 324 Art 5 324 Art 6 324 Art 10 324 Directive 98/34/EC (notification, consolidated) 245 Directive 98/48/EC 245 Directive 1999/42/EC 325, 326, 329 Directive 1999/70/EC (fixed-term work) 96 Directive 2000/13/EC 212 Directive 2000/78/EC (equal treatment in employment and occupation) 96, 97 Directive 2001/37/EC 212 Art 8 252 Directive 2001/83/EC 211, 285 Directive 2001/95/EC 218 Directive 2003/88/EC (working time) 41 Directive 2003/109/EC 310 Directive 2004/38/EC (citizenship) 455, 457, 474, 475–6, 477–8, 501 recital 5 475 recital 6 479 recital 24 497 Art 2(2) 478, 479, 480 Art 3(1) 477 Art 3(2) 478, 479, 480 Art 4 482 Art 4(1)–(3) 480 Art 5 481, 482 Art 5(1) 481 Art 5(2) 481 Art 5(5) 481 Art 6 476, 484, 485 Art 6(1) 482 Art 6(2) 482 Art 7 305, 482, 484, 485 Art 7(1) 305, 474, 476, 483, 488, 490 Art 7(2) 476 Art 7(3) 305

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Directive 2004/38/EC (citizenship) – continued Art 7(4) 482 Art 8 483, 485 Art 8(4) 483 Art 8(5) 483 Art 9 483, 485 Art 10(1) 483 Art 11(1) 483 Art 12(1) 483 Art 12(2) 484 Art 12(3) 484 Art 13(1) 483 Art 13(2) 484 Art 14(1) 482 Art 14(4) 304, 489 Art 15(1) 484 Art 16 485, 497 Art 16(1) 476, 484, 492 Art 16(2) 476, 484 Art 16(3) 484 Art 17 485 Art 17(1) 485 Art 17(3) 485 Art 17(4) 485 Art 22 482 Art 23 310, 318 Art 24(1) 487, 490, 492 Art 24(2) 489, 492, 493 Art 27 457, 492, 493, 499, 500 Art 27(1) 493, 498 Art 27(2) 493, 494 Art 28 457, 499, 500 Art 28(1) 497 Art 28(2) 497 Art 28(3) 497–9 Art 29 496, 499 Art 29(2) 496 Art 29(3) 496 Art 30 484, 500 Art 30(1) 498, 499 Art 30(2) 499 Art 30(3) 499 Art 31 484, 500 Art 31(1) 495, 499 Art 31(2) 499 Art 31(3) 499 Art 31(4) 499 Art 32 500 Art 32(1) 499 Art 33(1) 499, 500 Art 33(2) 500 Directive 2005/20/EC 218 Directive 2005/29/EC (unfair commercial practices) 156 Directive 2005/36/EC (recognition of professional qualifications) 325–9, 333 recital 2 325 recital 40 325 recital 42 326

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Directive 2005/36/EC (recognition of professional qualifications) – continued Art 2(1) 325 Art 5 326 Art 10 325 Art 11 325 Art 11(1) 325 Art 12 325 Art 13 325 Art 13(1) 326, 328 Art 13(2) 326, 328 Art 14 325, 326 Art 15 325 Arts 16–52 326 Directive 2006/42/EC 218 Directive 2006/48/EC Annex I 313 Directive 2006/95/EC 218 Directive 2006/123/EC (services) 138, 312–15, 327 recital 43 314 Art 1(1) 313 Art 2(2) 313 Art 4 315 Arts 5–8 314 Chapter III (Arts 9–15) 313 Art 9 313 Art 10 314 Arts 14–15 314 Chapter IV (Arts 16–21) 313 Art 16 314 Art 16(1) 314 Art 17 313, 314 Art 18 315 Arts 20–23 315 Art 28 315 Art 34 315 Art 34(1) 315 Directive 2007/46/EC Art 4(3) 293 Directive 2008/98/EC 49 Art 7(1) 49 Art 7(7) 49 Art 39(2) 49 Directive 2009/28/EC (renewable energy) 292 Directive 2009/48/EC 218 Directive 2010/63/EU 464 Directive 2013/32/EU 53 Directive 2013/55/EU 327, 329, 333 Directive 2014/40/EU 212 Directive 2014/104/EU 417, 435, 443 recital 5 435, 439 recital 6 435 Art 1 435–6 Art 3 440 Art 3(1) 436 Art 3(2) 436 Art 3(3) 436 Art 5 440

Directive 2014/104/EU – continued Art 5(1) 438 Art 5(2)–(4) 438 Art 6 440 Art 6(4)–(6) 438 Art 7 440 Art 9 437, 440 Art 9(1) 437 Art 9(2) 437 Art 10 440 Art 10(2)–(4) 437 Art 11 440 Art 11(1) 438 Art 11(2) 438 Art 11(4) 438 Art 12(1) 436 Art 13 439, 440 Art 14(2) 436 Art 17 440 Art 17(1) 439 Art 17(2) 439 Art 17(3) 439 Art 18 440 Art 18(1) 439 Art 18(2) 440 Art 19 440 Art 19(2)–(4) 440 Art 22(1) 440 Art 22(2) 440 Directive 2015/637/EU 465 Directive 2018/957/EU 38 Directive 2019/1/EU 431 Art 1(1) 431 Art 1(3) 431 Arts 4-28 431 Recommendations Recommendation 2003/361/EC 438 Recommendation 2009/527/EC 206 Recommendation [2019] C380/1 on initiation of preliminary rulings 155 Regulations Regulation 17/62/EEC 383, 417, 421, 423, 425 Art 11 423 Art 12 423 Art 14 423 Regulation 99/63/EEC Art 6 186 Regulation 67/67/EEC 387, 389 Regulation 950/68/EEC 224 Regulation 1612/68/EEC 317, 475, 486, 487 recital 5 475 Art 1 303–4 Art 5 303–4 Art 7(2) 486, 487 Art 10 475 Art 12 452, 458, 488

Table of Legislation

Regulation 1983/83/EEC 389 Regulation 1984/83/EEC 389 Regulation 417/85/EEC 389 Regulation 418/85/EEC 389 Regulation 2658/87/EEC 50 Regulation 4087/88/EEC 389 Regulation 4064/89/EEC (mergers) 337, 405, 414, 419 Art 2(2) 409 Regulation 2913/92/EEC (Community Customs Code) 225, 273 Regulation 339/93/EEC 213 Regulation 1310/97/EC 405 Regulation 1139/98/EC 295 Art 2(1) 295 Art 3 295 Regulation 2679/98/EC 246 Regulation 2790/99/EC 388, 389 Regulation 823/2000/EC 389 Regulation 2658/2000/EC 388, 389 Regulation 2659/2000/EC 388, 389 Regulation 539/2001/EC 481 Regulation 1400/2002/EC 389 Regulation 1/2003/EC (competition rules) 382, 383, 405, 417, 421, 422, 427, 429, 442 recital 1 429 recital 38 421 Art 2 421 Art 5 387 Art 5(1) 428 Art 5(2) 429 Art 6 387 Art 7 427 Art 7(1) 422, 426 Art 7(2) 422 Art 8(1) 426, 427 Art 9 426, 427 Art 9(1) 426 Art 9(2) Art 10 387, 426, 427 Art 11 427, 430 Art 11(1)–(3) 428 Art 11(5) 428 Art 11(6) 428 Art 12 427, 430 Art 12(1) 428 Art 13 430 Art 13(1) 428 Art 14 425, 430 Art 15 429, 430 Art 15(1)–(3) 430 Art 16(1) 429, 430 Art 16(2) 428 Art 17 426 Art 17(1) 423 Art 18 426 Art 18(1) 423 Art 19(1) 423, 427 Art 19(2) 423

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Regulation 1/2003/EC (competition rules) – continued Art 20(1) 423 Art 20(3) 424 Art 20(4) 424 Art 20(5) 424 Art 20(6)–(8) 424 Art 21 427 Art 21(1) 425 Art 21(3) 425 Art 22(2) 428 Art 23 423, 427 Art 23(1)–(3) 426 Art 23(2) 347 Art 24 423, 427 Art 27 427 Art 28 425 Regulation 258/2003/EC 389 Regulation 139/2004/EC (mergers) 337, 405, 406, 410, 414 recital 20 406 Art 1 406, 408–9 Art 1(1) 408 Art 1(2) 408, 412 Art 1(3) 408, 412 Art 2(1) 409 Art 2(2) 409 Art 2(4) 408 Art 3 406–8 Art 3(1) 406, 407, 412 Art 3(2) 407 Art 3(4) 407, 408, 412 Art 5 409 Regulation 772/2004/EC 389 Regulation 773/2004/EC 421 Art 3 423 Art 7(1) 423 Art 10 425 Art 14 425, 427 Art 15 425 Regulation 883/2004/EC 487 Regulation 1013/2006/EC Art 50(4e) 50 Annexes III–V 50 Regulation 1459/2006/EC 389 Regulation 450/2008/EC 225 Regulation 622/2008/EC 421 Regulation 764/2008/EC (mutual recognition) 213–16, 221, 246 Regulation 765/2008/EC 213, 246 Regulation 169/2009/EC 389 Regulation 487/2009/EC 389 Regulation 906/2009/EC 389 Regulation 1223/2009/EC 212 Regulation 267/2010/EU 389 Regulation 330/2010/EU 388, 389 Art 5 378 Regulation 461/2010/EU 389 Regulation 1217/2010/EU 388, 389

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Regulation 1217/2010/EU – continued Art 6 378 Regulation 1218/2010/EU 388, 389 Regulation 1259/2010/EU 37 Regulation 182/2011/EU (comitology) 22, 48, 49, 70 Art 2 49 Regulation 211/2011/EU 462, 464 Annex 1 463 Regulation 492/2011/EU 89, 304, 306, 317, 486, 487 recital 6 475 Art 1(2) 317 Art 3(1) 318 Art 3(2) 318 Arts 4–6 318 Art 7(1) 318 Art 7(2) 319, 487 Art 7(3) 319 Art 8 319 Art 9 319 Art 10 452, 458, 488 Regulation 1024/2012/EU 215, 327 Regulation 1025/2012/EU 218 Art 1 218 Art 2(1) 217 Regulation 1257/2012/EU 37 Regulation 952/2013/EU (Union Customs Code) 225 Regulation 316/2014/EU 388, 389 Art 5 378 Regulation 390/2014/EU 35 Regulation 697/2014/EU 389 Regulation 2016/429/EU 49 Regulation 2016/1103/EU 37 Regulation 2016/1104/EU 37 Regulation 2016/1192/EU 135 Regulation 2016/1245/EU 50 Regulation 2017/1939/EU 37 Regulation 2018/1671/EU 12 Regulation 2018/1724/EU 215 Regulation 2019/515/EU (MMR 2) 215, 221 recital 8 215 Art 1 215 Art 5 215 Art 8 215 Art 9 215 Art 10 215 Regulation 2019/788/EU 462 recital 5 463 recital 8 463 Art 1 462 Art 2(1) 463 Art 2(2) 463 Art 3 463 Art 3(1) 463 Art 3(2) 463 Art 5 463 Art 6(1) 463 Art 6(3) 463 Art 8 464

Regulation 2019/788/EU – continued Arts 9–11 463 Art 12 464 Art 13 464 Art 14 464 Art 14(2) 464 Art 15 464 Art 15(1) 464 Art 15(2) 464 Regulation 2019/1020/EU 246 Art 1 247 Art 2 247 Art 4 247 Art 6 247 Annex 1 247 Regulation 2019/1381/EU 465 National legislation UK Alcohol (Minimum Pricing) (Scotland) Act 2012 260 Consumer Rights Act 2015 Customs and Excise Act 1952 280 European Communities Act 1972 13, 45, 76, 79 European Union Act 2011 13 European Union (Withdrawal) Act 2018 s 3(2)(a) 48 Fair Trading Act 1973 405 Immigration (European Economic Area) Regulations SI 1003/2006 477 Merchant Shipping Act 1988 79 Monopolies and Mergers Act 1965 405 Shops Act 1950 263, 293 Social Security Act 1975 89 Austria UWG (Unfair Competition Act 1992) 293, 296 Art 30 297 Belgium Law on Consumer Protection (1991) 274 Art 80(3) 274 Denmark Accession Act 97 Lov omændring af Konkurrenceloven (2000) 405 Finland Laki Kilpailunrajoituksista (1998) 405 Germany Act of Accession 84 Biersteuergesetz Art 9 262–3, 291, 292 Art 10 262–3, 291 Constitution 77, 83, 84 Gesetz gegen Wettbewerbsbeschränkungen (GWB) (1957) 405

Table of Legislation

Reinheitsgebot 1516 256, 291 Social Code 489

Portugal Decree-Law No 48 051 116–17

Netherlands Medelinngingswet (1998) 405 WFBV (Law on formally foreign companies) Art 1 311

Spain Civil Code 93–4 Sweden Rättegångsbalk Ch 54, para 10 153

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Tables of Equivalences

TABLES OF EQUIVALENCES Note. The Tables contain only the Treaty provisions referred to in the text. Treaty on European Union TEU Maastricht *Introduced by ToA

TEU (Amsterdam)

A

1

B

2

TEC (Amsterdam)

10 5 (3b TEC post Maastricht) F F.1* G

6 7 8 (repealed) 191, first para

H

9 (repealed) 189 190 4 202, first and second indents 203 205(2) and (4)

10 J.1 J.5 J.6

11 15 23 16

211 214 217(1), (3) and (4) 220 11 and 11a

TEU (Lisbon)

1 2 3 4 4(3) 5 6 7 9 10 10(4) 11 12 13 14 14(1-2) 14(1-3) 15 16 16 (1) 16(2) and (9) 16(4) and (5) 17 17(1) 17(3) and (7) 17(6) 19 20 22 24 29 31 32

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TEU Maastricht *Introduced by ToA

TEU (Amsterdam)

N O

48 49

TEC (Amsterdam)

TEU (Lisbon) 47 48 49 50 51

Treaty on the Functioning of the European Union TEEC *Added or replaced by SEA

6

8a* 8c* 9 10 12 28 29 30 34 36 37 38 48 49 50 51 52 55 56 57

TEC Post Maastricht **Introduced by MT *** Introduced by ToA

TEC Post Amsterdam

191(a)*** 231(b)*** 6 6a***

255 286 12 13

8a** 8b** 8c** 8d** 8e** 7a 7c 9 10 12 28 29 30 34 36 37 38 48 49 50 51 52 55 56 57

18 19 20 21 22 14 15 23 24 25 26 27 28 29 30 31 32 39 40 41 42 43 45 46 47

TEU Post Amsterdam (TEU Maastricht)

TFEU

2 3 4 5 6 14 15 16 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 34 35 36 37 38 45 46 47 48 49 51 52 53

Tables of Equivalences

TEEC *Added or replaced by SEA 58 59 60 66

TEC Post Maastricht **Introduced by MT *** Introduced by ToA 58 59 60 66 73i*** 73j*** 73m***

TEC Post Amsterdam 48 49 50 55 61 62 65

TEU Post Amsterdam (TEU Maastricht)

29 (K.1)

31 (K.3) 31 (K.3) 30 (K.2) 32 (K.4) 75 85 86 87 89 90 95 99* 100a* 100 102a* 103

119 130r* 110 113 228 229 to 231 138(3)

139 140, second, third and fourth para 141

75 85 86 87 89 90 95 99 100a 100 102a** 103 104c** 105**

71 81 82 83 85 86 90 93 95 94 98 99 104 105

109j(1)** 119 130** 130r 110 113

121(1) 141 157 174 131 133

228 229 to 231 138(3) 138a** 138b, second para** 138c** 138d** 138e 139 140, second, third and fourth para 141

300 302 to 304 190(4) and (5) 191, second para 192, second para 193 194 195 196 197, second, third and fourth para 198

TFEU

54 56 57 62 67 77 81 82 83 86 87 89 91 101 102 103 105 106 110 113 114 115 120 121 126 127 139 140(1) 157 173 191 206 207 216 218 220 223 224 225 226 227 228 229 230 231

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TEEC *Added or replaced by SEA 142 143 144

TEC Post Maastricht **Introduced by MT *** Introduced by ToA 142 143 144

TEC Post Amsterdam

147 148 150 151 152 153 154

147 148 150 151 152 153 154

204 205(1) and (2) 206 207 208 209 210

157(2) 159 160 161 162 and 156 163 165, second para

157(2) 159 160 161 162(2) and 156 163 165, second para

166, first and second para 167 168a*

166, first and second para 167 168a

213(2) 215 216 217(2) 218(2) and 212 219 221, second and third para 222

169 170 171 172

169 170 171 172

173 174 175 176 177 178

173 174 175 176 177 178

223 225 225a (inserted by Nice Treaty) 226 227 228 229 229a (inserted by Nice Treaty) 230 231 232 233 234 235

179 180 181 182 183

179 180 181 182 183

236 237 238 239 240

199 200 201

TEU Post Amsterdam (TEU Maastricht)

TFEU

232 233 234 236 237 238 239 240 241 242 243 244 245 246 247 248 249 250 251 252 253 256 257 258 259 260 261 262 263 264 265 266 267 268 269 270 271 272 273 274 275 276

Tables of Equivalences

TEEC *Added or replaced by SEA 184 185 186

TEC Post Maastricht **Introduced by MT *** Introduced by ToA 184 185 186

TEC Post Amsterdam

206 206b 189

109a** 109b** 188b 188c 189

112 113 247 248 249

145, third indent 145, third indent 149*

145, third indent 145, third indent 189b**

202, third indent 202, third indent 251

190 191

190 191

253 254

195 196 198

195 196 198 198a**

259 260 262 263, second, third and fourth para 264 265 266 267 272(2) to (10) 276 11 and 11a (inserted by Nice Treaty) 11 and 11a (inserted by Nice Treaty) 11 and 11a (inserted by Nice Treaty) 11 and 11a (inserted by Nice Treaty) 288 295 308 309

129 130 203(2) to (10) 206c

215 222 235

198b** 198c** 198d 198e 203(2) to (10) 206

215 222 235 236***

TEU Post Amsterdam (TEU Maastricht)

241 242 243

TFEU

277 278 279 282 283 284 286 287 288 289 290 291 294 295 296 297 300 302 303 304 305

27a to 27e, 40 to 40b and 43 to 45

306 307 308 309 314 319 326

27a to 27e, 40 to 40b and 43 to 45

327

27a to 27e, 40 to 40b and 43 to 45

328

27a to 27e, 40 to 40b and 43 to 45

329

ToA = Treaty of Amsterdam; SEA = Single European Act; MT = Maastricht Treaty

340 345 352 354

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Abbreviations

ABBREVIATIONS AG AFSJ CCT CDR CFI CJEU CHEE COREPER EC ECB ECFR ECHR ECI ECJ ECSC EEA EEC EESC EFTA EIB EMU ERASMUS EU EURATOM GATT MEP MHEE NATO NCA OECD OJ QMV R&D SEA SGP SIEC SMEs SSNIP TEC

Advocate General area of freedom, security and justice Common Customs Tariff consensual dispute resolution Court of First Instance Court of Justice of the European Union charge having equivalent effect Comité des représentants permanents European Community European Central Bank Charter of Fundamental Rights of the European Union European Convention on Human Rights European citizens’ initiative European Court of Justice European Coal and Steel Community European Economic Area European Economic Community European Economic and Social Committee European Free Trade Area European Investment Bank European Monetary Union European Community Action Scheme for the Mobility of University Students European Union European Atomic Energy Community General Agreement on Tariffs and Trade Member of the European Parliament measure having equivalent effect North Atlantic Treaty Organization national competition authority Organisation for Economic Cooperation and Development Official Journal of the European Union qualified majority voting research and development Single European Act Stability and Growth Pact significant impediment to effective competition small and medium-sized enterprises small but significant and non-transitory increase in prices Treaty Establishing the European Community

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TEEC TEU TFEU TTA UK US WEU WTO

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Treaty Establishing the European Economic Community Treaty on European Union Treaty on the Functioning of the European Union technology transfer agreement United Kingdom United States [of America] Western European Union World Trade Organization

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part

I

PART I

THE FOUNDATIONS OF THE EUROPEAN UNION 1 Creation of the European Community and European Union

3

2 The Institutional Framework of the European Union

17

3 Division of Competences between the Union and the Member States

33

4 The Sources of European Law

43

5 The Law-making Process in the European Union

63

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Creation of the European Community and European Union

chapter

1 dy stu ints o p

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3

Creation of the European Community and European Union

After reading this chapter, you will be able to understand: • the original aims and objectives behind the creation of the European Community and European Union • the twin-track approach of widening and deepening the European Union project • the relationship between the United Kingdom and the European Union.

1.1 Introduction The idea of the creation of a united Europe is not a new one. Yet until the end of the Second World War, all plans to establish such a union failed. The War served as a catalyst, States realising the full impact of two global wars on the European continent. In 1946, Sir Winston Churchill famously made a speech calling for the creation of a United States of Europe, to be based on reconciliation between France and Germany. Various motives linked to the aftermath of the Second World War (see 1.2 below) led to the creation of a number of international organisations, among them the European Economic Community (EEC, 1957), which, through a series of treaties expanding its membership and competences, transformed into the contemporary European Union (EU) based on the 2007 Treaty of Lisbon. The United Kingdom’s (UK’s) attitude towards the EU, as well as its membership of the EU, was always ambivalent. A referendum held on 23 June 2016 heralded the process of withdrawal of the UK from the EU under what is known as ‘Brexit’ (see further 1.6 below).

1.2 Motives for European integration In the years following the end of the Second World War, responding to the interests and needs of European States but also to the threats and challenges they faced, an array of international organisations was created on the European continent. There were three main reasons for this: (a) The States were eager to build a peaceful and more stable future for Europe and themselves. The result of this wish to prevent further conflicts and to provide human rights to those living in European States, was the creation in 1949 of the Council of Europe, a forum within which the States of Europe could cooperate, especially on social, cultural and legal matters. Its greatest success was the adoption in 1950 of the Convention for the Protection of Human Rights and Fundamental Freedoms (commonly referred to as the European Convention on Human Rights (ECHR)) and its enforcement machinery. (b) The economies of the European States had been devastated by two wars and needed to be rebuilt. It was acknowledged that cooperation, rather than coexistence, was essential for economic growth. The United States (US) provided

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financial assistance under the Marshall Plan, a European recovery programme that was administered by the Organisation for European Economic Cooperation (1948), which later became the Organisation for Economic Cooperation and Development (OECD). Undoubtedly this encouraged States to cooperate in the economic field. (c) Security issues were also high on the agenda. The Western European Union (WEU) was established in 1948 by Belgium, France, Luxembourg, The Netherlands and the United Kingdom as a security alliance to prevent another war. However, the Berlin blockade in 1948–49 (during which the Soviet Union denied the Western Allies access to the sectors of Berlin under allied control) and the strain on the relationship between the US and the Soviet Union triggered the creation of the North Atlantic Treaty Organisation (NATO) in 1949, the primary objective of which was to defend European States against the rising Soviet threat. In 1950 Pleven, then French Prime Minister, suggested the creation of a European Defence Community. Whilst the treaty was signed by France, Germany, Italy, Belgium, The Netherlands and Luxembourg, it failed owing to the lack of ratification by the French Parliament. This put an end to a European defence organisation. In 2011 the WEU ceased to exist. Yet none of these organisations led to the creation of the EU.

1.3 The creation of international (European) organisations The four organisations mentioned in 1.2 above are international organisations, ie structures established by States in order to fulfil a certain role: • Council of Europe – peace, cultural/social/legal cooperation, protection of human rights • OECD – economic cooperation • NATO and WEU – military defence. Likewise, the EU was set up to provide peace, security, a harmonious development of economic activities, economic stability, a raising of the standard of living and a guarantee of well-being for those living on the European continent. International organisations are usually based on a treaty, an agreement between States that binds them on the international level once they have ratified it. Such organisations are endowed by States with powers (through a mechanism of transfer of sovereign powers) in order to achieve the aims and objectives set out in the specific treaty. This formal transfer of sovereign powers from the States to the international organisation was on several occasions recognised by the European Court of the Justice (ECJ), now the superior court of the Court of Justice of the European Union (CJEU), the judicial body of the European Union (see Chapter 8), in relation to the European Union (Case 26/62 NV Algemene Transport- en Expeditie Onderneming van Gend & Loos v Netherlands Inland Revenue Administration [1963] ECR 1; Case 6/64 Costa v ENEL [1964] ECR 585). An international organisation can act only if it has received such (delegated) powers. The treaty acts as the constitution of the international organisation, specifying its composition, its membership, its institutions and their working relations, its areas of competences, etc. Therefore it is important to read with care any treaty that establishes an international organisation. Many organisations go through a dynamic process, in the sense that their powers and competences change over time as treaties are amended to fit the interests of the

Creation of the European Community and European Union

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5

members. For example the Organisation for European Economic Cooperation mutated into the OECD. Likewise, the European Coal and Steel Community (ECSC, created in 1951 for a period of 50 years only) became part of the EC when the Treaty establishing it expired on 23 July 2002. The EU has transformed mainly through two mechanisms: • Functional integration: the European organisation has been given more and more sectors/areas of competences. • Spill-over effect: the European organisation was allowed to act in a certain field that nevertheless had effects on another one. States then endowed the European organisation with the powers to act in the latter field. That being said, it must be borne in mind that this process was developed by States, and especially by statespersons, without the involvement of their citizens. Consequently, a pending and recurrent issue is the involvement of European citizens in the European integration project, and the challenge of making the EU a more democratic international organisation. In Case 26/62 NV Algemene Transport- en Expeditie Onderneming van Gend & Loos v Netherlands Inland Revenue Administration [1963] ECR 1 and in Case 6/64 Costa v ENEL [1964] ECR 585, the ECJ explained that the States had voluntarily limited their sovereignty in favour of a sui generis legal order:

e cas ple m a ex

The objective of the [EU] Treaty, which is to establish [an internal] Market, the functioning of which is of direct concern to interested parties in the [EU], implies that this Treaty is more than an agreement which merely creates mutual obligations between the contracting states … The [EU] 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 subjects of which comprise not only Member States but also their nationals. (Case 26/62 Van Gend en Loos, 12) Consequently, [b]y contrast with ordinary international treaties, the [EU] Treaty has created its own legal system which … became an integral part of the legal systems of the Member States and which their courts are bound to apply. By creating a [Union] of unlimited duration, having its own institutions, its own personality, its own legal capacity and capacity of representation on the international plane and, more particularly, real powers stemming from a limitation of sovereignty or a transfer of powers from the States to the [Union], the Member States have limited their sovereign rights … and have thus created a body of law which binds both their nationals and themselves. … [T]he law stemming from the treaty, an independent source of law, could not, because of its special and original nature, be overridden by domestic legal provisions, however framed, without being deprived of its character as [EU] law and without the legal basis of the [Union] itself being called into question. The transfer by the states from their domestic legal system to the [Union] legal system of rights and obligations arising under the Treaty carries with it a permanent limitation of their sovereign rights against which a subsequent unilateral act incompatible with the concept of the [Union] cannot prevail. (Case 6/64 Costa v ENEL, 593–94)

1.4 Widening participation The European project started with six Member States (France, Germany, Italy, The Netherlands, Belgium and Luxembourg). There are now 27 Member States in the EU (see Figure 1.1).

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The UK, Ireland and Denmark joined in 1973. Norway had also agreed upon its terms for entry, but the Norwegian people rejected European Community membership in a referendum, mainly because of concerns about their principal industries, oil and fishing. Greece started accession negotiations in 1976 after the fall of the military junta and the restoration of democracy. She became a Member State in 1981. Two former dictatorships, Spain and Portugal, joined in 1986 after eight years of negotiations, complicated by the fact that Portugal was very poor, Spain had a huge fishing fleet, and both countries, as large-scale producers of fruits and vegetables, would compete with France and Italy. The next round of enlargement was straightforward, with the accession of Austria, Sweden and Finland in 1995. Norway also participated in the negotiations, but yet again its population rejected the proposal for membership. The Czech Republic, Slovakia, Latvia, Lithuania, Estonia, Hungary, Poland and Slovenia, all former Communist States, and Malta completed the process of preparing for EU membership, and were admitted as Member States in 2004. Cyprus was also admitted in 2004. That being said, the island is still divided between the Greek Cypriot south, whose government is legally recognised internationally as the only legitimate government of the whole island, and the Turkish Cypriot north, whose government is not legally recognised by any State except Turkey. It was hoped that enough pressure could be exerted by the EU to achieve a political settlement before Cyprus’s entry, but this did not happen. In theory, the whole of Cyprus is part of the EU, but in practice only the Greek part is subject to EU law. Romania and Bulgaria were allowed to join in 2007 and Croatia in 2013. 1950 France, Germany, The Netherlands, Belgium, Luxembourg, Italy

1973 8QLWHG .LQJGRP ,UHODQG 'HQPDUN

1981 *UHHFH

1986 3RUWXJDO 6SDLQ

1995 Austria, Sweden, Finland

2004 (VWRQLD &]HFK 5HSXEOLF /DWYLD +XQJDU\ 3RODQG 6ORYHQLD 6ORYDNLD &\SUXV 0DOWD

2007 %XOJDULD 5RPDQLD

2013 &URDWLD

Figure 1.1 Membership of the EU (1950–2013)

In order to become a Member State of the EU, a State must, under Article 49 TEU, ‘respect the values referred to in Article 2 and [be] committed to promoting them’ (see also Case C-619/18 Commission v Poland EU:C:2019:531, para 42). The first step is for the State to meet the key requirements that were set at the Copenhagen Summit in June 1993. The criteria are, first, that the State must have a stable government and institutions that are democratic and based on the rule of law and human rights (including the protection of minorities). It must also have a functioning market economy that is able to cope with the single market, which is the free trade and movement of labour, goods, services and capital. Moreover, the State must be able to accept the acquis communautaire, a French term that denotes all the rights and obligations that current members of the EU have (see 4.1). The negotiations focus on the conditions and timing of the candidate’s adoption, implementation and enforcement of the acquis which is divided into 35 different policy fields (chapters), each of which is negotiated separately. Once all chapters have been negotiated, candidate States sign and ratify an accession treaty.

Creation of the European Community and European Union

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7

The prospect of EU membership has been offered to nine States: the Former Yugoslav Republic of Macedonia, Montenegro, Iceland, Albania, Bosnia-Herzegovina, Kosovo, Turkey and Serbia. Five of them have been granted official candidate status: Albania, the Former Yugoslav Republic of Macedonia, Montenegro, Serbia and Turkey. Although accession negotiations with Iceland were formally opened in June 2010, its Government requested in March 2015 that ‘Iceland should not be regarded as a candidate country for EU membership’. Turkey made repeated applications to join the EC, but until 2005 these were always rejected for three main reasons: (a) Turkey’s economy is underdeveloped; (b) Turkey’s human rights record is poor; and, most importantly, (c) Greece would not contemplate Turkey’s admission until there was settlement of the Cyprus problem (see above). Turkey has now been allowed to begin negotiations, but until Turkey agrees to apply the Additional Protocol of the Ankara Association Agreement to Cyprus, eight negotiation policy fields will not be opened and no chapter will be provisionally closed. As Cyprus is now a Member State, it has the power to veto Turkish membership. Ukraine also expressed an interest in joining the EU, but owing to the ongoing armed conflict there, it is unlikely to become a Member State in the near future. The only European States that seem happy to stay outside the EU are Norway and Switzerland. Norway is, however, a member of the European Economic Area (EEA), and Switzerland has signed a series of agreements with the EU; both are also part of the Schengen Area (see 1.5 below) and cooperation mechanism.

1.5 Deepening cooperation ECSC 1951 EEC + EURATOM Merger 1965 Single European Act 1986 EU 1992 EU 1997 EU 2000 European Constitution EU 2007

Figure 1.2 Deepening cooperation

The story of the European integration project started with the creation of the ECSC in 1951. A year earlier, Robert Schuman, the then French Foreign Minister, suggested a scheme (known to history as the Schuman Plan, although it was drafted by Jean Monnet) with the following aims: (a) to help the economic recovery and boost economic growth in Europe; (b) to remove competition between France and Germany that had led to two world wars; (c) to put the coal and steel industries of both Germany and France under the control of a supra-national body, ie a body that would be able to tell States what they could and could not do. This would ensure that Germany could not produce armaments. Germany was happy to accept the scheme, and other States were invited to join. Belgium, The Netherlands, Luxembourg (which had already formed the Benelux economic union) and Italy all agreed, but the UK refused to join, partly out of insularity and partly because the then Labour Government had just nationalised both the coal and the steel industries. In 1950, six States signed the Treaty of Paris, bringing into being the ECSC, the first genuinely supra-national body with a High Authority, an Assembly, a Council and a Court, organs that would later become the Commission, the European Parliament, the Council and the Court of Justice of the European Union (see Chapter 2). The aim of the ECSC was to remove barriers to trade in coal and steel, and to set up and manage common policies.

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As the ECSC had proved very successful in revitalising the economies of the Member States, an intergovernmental committee, headed by Paul-Henri Spaak, presented a report in 1956 suggesting the establishment of an economic community and an atomic energy community. The result was the creation of the EEC and the European Atomic Energy Community (EURATOM) in Rome in 1957 (the Treaties of Rome). The aim of the EEC was to establish a common market, based on a customs union, the free movement of goods, persons and capital and common policies. It was decided that the three international organisations, the ECSC, the EEC and EURATOM, would have their own institutions but would share the Court of Justice and the Parliamentary Assembly. Later, in 1965, the Merger Treaty saw the creation of a single Council (of Ministers) and a Commission. Slowly, but assuredly, the three organisations were becoming one (see Figure 1.3). The Single European Act 1986 was the first substantial revision of the original EEC Treaty. Its amendments attempted to ensure increased efficiency (use of qualified majority voting) and democracy (increased powers given to the European Parliament) in the (now) European Community (EC), and introduced an internal market, also referred to as a ‘single market’, to be attained by 1 January 1993 (see Chapter 11). At this juncture it was obvious that States’ cooperation went beyond mere economic collaboration. In 1985 five Member States (Belgium, France, Germany, Luxembourg and EEC The Netherlands) adopted the Schengen ECSC Agreement, which gradually abolished border checks. In 1990 these States went further by EUR EURATOM adopting the Schengen Convention, which provided for, inter alia, the abolition of internal border controls and a common visa policy, thereby creating the Schengen Area. These treaties were independent of those operating the EC (see 20.2.1). European Communities The next major step was the Maastricht Treaty in 1992 (formally, the Treaty on Figure 1.3 The European Communities European Union or TEU) that created the EU with increased powers and expanded areas of competences. In fact, the TEU worked as a framework treaty, setting up a three-pillar or temple structure to delineate these powers and competences (see Figure 1.4). The first pillar included the ECSC, EURATOM and the EC (the latter based on the European Community Treaty), ie the European Communities. The second pillar dealt with the Common Foreign Policy and Security, whilst the third pillar addressed issues relating to Justice and Home Affairs. After two further amendments, the Treaty of Amsterdam 1997 and the Treaty of Nice 2000, the States agreed, in the Laeken Declaration in 2001, to set up a committee called ‘European Convention’ to draft a constitution for Europe. A European Constitution would have simplified matters since it aimed to incorporate all the aforementioned European Treaties into a single legal document. Although a text was agreed in 2004, it could not enter into force as it failed to be ratified by all the Member States. In 2007 the proposed treaty was formally abandoned and efforts were directed towards amending the Treaty of Nice.

Creation of the European Community and European Union

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9

A reform treaty was adopted in Lisbon in 2007 and took effect in December 2009. The Lisbon Treaty amended the founding Treaties by renaming the European Community Treaty as the Treaty on the Functioning of the European Union (TFEU) and renumbering the articles of the TEU and TFEU. Among the main changes introduced were: •the creation of the High Representative of the Union for Foreign Affairs and Security Policy •the recognition of the vital role played by the European Treaty of Maastricht (1992) Council •a new definition of secondary EU law Pillar I •the insertion of the Charter of Fundamental Rights of the Coal and Steel Pillar II European Union into the TEU, giving it the same legal Pillar III Community Common value as the Treaties Justice and EURATOM Foreign Policy •the increased involvement of national parliaments in the Home Affairs and Security European law-making process, and Community •the termination of the three-pillar structure described above. Figure 1.4 The three pillars of the EU under The Lisbon Treaty is certainly not the last chapter in this the Maastricht Treaty chain of constitutional agreements. As the Court explains, ‘the implementation of the process of integration … is the raison d’être of the EU itself’ (Opinion 2/13 [Accession of the European Union to the European Convention for the Protection of Human Rights and Fundamental Freedoms] EU:C:2014:2454, para 172). The combination of new political, economic and financial challenges, the celebration of 60 years of the European Union, and the UK’s withdrawal from the EU (see 1.6) have led the European Commission to launch a process of reforming the European Union. In its White Paper on the Future of Europe (COM(2017)2025 of 1 March 2017), the European Commission maps out the drivers of change in the next decade and presents five scenarios for how Europe could evolve by 2025. These scenarios are: • Carrying on: The European Union focuses on delivering its positive reform agenda • Nothing but the single market: The European Union is gradually re-centred on the single market • Those who want more do more: The European Union allows willing Member States to do more together in specific areas • Doing less more efficiently: The European Union focuses on delivering more and faster in selected policy areas, while doing less elsewhere • Doing much more together: The European Union decides to do much more together across all policy areas. While the European Commission opens a debate with citizens on how Europe should evolve in the years to come, the leaders of 27 Member States and of the European Council, the European Parliament and the European Commission have committed to the Rome Agenda and to work towards a safe and secure Europe, a prosperous and sustainable Europe, a social Europe, and a stronger Europe on the global scene (Rome Declaration of 26 March 2017).

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in practice The Lisbon Treaty renumbered the articles of the European Community Treaty and renamed it the Treaty on the Functioning of the European Union.

In parallel to the political and economic development in Europe, States attempted to create an economic and monetary union. In 1979 the European Exchange Rate Mechanism was established and the European Currency Unit (ECU) introduced with the aim to create monetary stability. The system operated outside of the then EEC. The Economic and Monetary Union (EMU) became a reality under the Maastricht Treaty. While its economic aspects were defined in rather general terms, its monetary part was expressed in more coercive and specific ones. Indeed, the economic policy remains decentralised, with emphasis on coordination (Articles 120 and 121(1) TFEU), whilst the monetary and exchange-rate policies were centralised leading to the creation of a single currency in 1999, the euro, and the transfer of monetary powers to the European System of Central Banks headed by the European Central Bank (ECB) (see 2.5), the primary objective of which is to ‘maintain price stability’ (Article 127(1) TFEU). This eurozone or euro area now consists of 19 Member States (Lithuania being the latest State to adopt the euro on 1 January 2015). While Denmark is still using its opt-out obtained under the Maastricht Treaty, ‘Member States with a derogation’ (Article 139(1) TFEU) – Bulgaria, Croatia, the Czech Republic, Hungary, Poland, Romania and Sweden – are required, under the terms of their Accession Treaties, to adopt the euro and join the eurozone as soon as they satisfy the euro convergence (or Maastricht) criteria under Article 140(1) TFEU, including successful participation in the European Exchange Rate Mechanism (ERM II) for at least two years. The world financial crisis of 2008 emphasised the weaknesses and the incompleteness of the institutional design of the EMU, notably in respect of the economic policies where there was no EU institutional equivalent to the ECB. The blatant disregard by Member States of Treaty requirements relating to budget deficits and government debt led to sovereign debt crisis in four southern European countries (Portugal, Italy, Greece and Spain) and Ireland (PIIGS), threatening to undermine the economies of the rest of the Union and the very existence of the euro. While interest rates and monetary easing fell within the exclusive domain of the ECB, taxation and government expenditures remained national. In other words, the EU had a monetary union but no fiscal union. Following a proposal by Jean-Claude Trichet, the then head of the ECB, to adopt a form of fiscal union to guarantee adequate and prudent fiscal policies across the EU, in March 2011 the Member States first reformed the 1997 Stability and Growth Pact (SGP), designed to maintain stability within the EMU, with a view to strengthening its procedure and imposing automatic penalties for noncompliance with its deficit or debt rules. This reform was then followed by the adoption outside the framework of the EU Treaties, on 2 March 2012, of a new intergovernmental Treaty on Stability, Coordination and Governance in the Economic and Monetary Union (also referred to as TSCG or the Fiscal Stability Treaty). This Treaty, now known as the Fiscal Compact, signed by all Member States except the Czech Republic and the UK, entered into force on 1 January 2013 for the 16 Member States that ratified it before this date (a minimum of 12 ratifications were required). As from April 2019, the Treaty has been ratified by all EU States, of which two noneurozone States (Denmark and Romania) are bound in full by it, one (Bulgaria) is

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bound by all fiscal and governance provisions (Titles III and V) but none of the economic ones (Title IV), and the others (Hungary, Poland, Sweden, Croatia and the Czech Republic) are bound only by the governance provisions (Title V). The Fiscal Compact requires the ratifying States to keep their national budgets in balance or in surplus within a year of its entry into force for them, and to introduce a self-correcting mechanism to prevent future breaches. The Treaty also replicates the debt-brake rules contained in the SGP and requires States gradually to reduce their government debt to GDP ratio if it exceeds the 60% reference level. The Presidents of the Commission, the Euro Summit, the Eurogroup and the European Central Bank were invited by the Euro Summit of 24 October 2014 ‘to prepare next steps on better economic governance in the euro area’. The mandate given to Presidents Jean-Claude Juncker, Donald Tusk, Jeroen Dijsselbloem and Mario Draghi was confirmed by the European Council of 18 December 2014. They then decided also to associate the President of the European Parliament, Martin Schulz, to this work. On 22 June 2015, following numerous consultations, they published the Report ‘Completing Europe’s Economic and Monetary Union’ (also known as the ‘Five Presidents’ Report’) (). It is notably observed in the report that For the euro area to gradually evolve towards a genuine Economic and Monetary Union, it will need to shift from a system of rules and guidelines for national economic policy-making to a system of further sovereignty sharing within common institutions, most of which already exist and can progressively fulfil this task. In practice, this would require Member States to accept increasingly joint decision-making on elements of their respective national budgets and economic policies. (at 5) The report contains both medium- and long-term measures: • Stage one: 1 July 2015 to 30 June 2017: – each country should create independent ‘competitiveness authorities’, national bodies ‘in charge of tracking performance and policies in the field of competitiveness’ (at 7) with a mandate to ‘assess whether wages are evolving in line with productivity and compare with developments in other euro area countries and in the main comparable trading partners’ (at 8); – other measures include an advisory European Fiscal Board, completion of the Banking Union, and a reorganisation of the European Semester. • Stage two: 1 July 2017 to 31 December 2024 at the latest: – formalising and making more binding the convergence process; – setting up a macroeconomic stabilisation function for the euro area; – integrating the European Stability Mechanism (ESM) into the EU law framework; and – setting up a euro area treasury accountable at the European level. While some of these changes should be possible within the current EU treaties, others, such as the last two, are likely to require treaty changes. As the report says: Euro area member states would continue to decide on taxation and the allocation of budgetary expenditures according to national preferences and political choices.

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However, as the euro area evolves towards a genuine EMU, some decisions will increasingly need to be made collectively while ensuring democratic accountability and legitimacy. (at 18) This Five Presidents’ Report was followed by a Commission’s Reflection Paper on the deepening of the Economic and Monetary Union setting out a roadmap for the completion of the Economic and Monetary Union by 2025 (‘Further steps towards completing Europe's economic and monetary union: a roadmap’ COM(2017) 821 final) in which the Commission identifies four complementary areas where progress is still needed: (1) Financial Union: risk-reduction package to strengthen the resilience of EU banks, common backstop for the Single Resolution Fund and European Deposit Insurance Scheme (see Commission Communication ‘on completing the Banking Union’ of 11 October 2017 COM(2017) 592 final). (2) Fiscal Union: stronger Structural Reform Support Programme (see COM(2017) 826 final) and adoption within the 2020 Multiannual Financial Framework of proposals for structural reform support, and a stabilisation function for the euro area (see COM(2017) 822 final). (3) Economic Union: continuation of the process of reforms for real convergence across the EU within the euro area and for countries on their way to joining the euro, reinforced budget for, and continuation beyond 2020 of, the Structural Reform Support Programme including dedicated convergence facility for noneuro Member States (see COM(2017) 825 final and Regulation (EU) 2018/1671 amending Regulation (EU) 2017/825 to increase the financial envelope of the Structural Reform Support Programme and adapt its general objective [2018] OJ L284/3), and further strengthening of coordination of national economic policies. (4) Democratic accountability and strengthened governance: incorporation of the Treaty on Stability, Coordination and Governance into Union law (see COM(2017) 824 final), creation of a European Monetary Fund (see COM(2017) 827 final), and creation of a unified representation of the euro area in the International Monetary Fund (see COM(2015) 603 final). There has been no visible progress to date, notably in the latter two proposals since the Member States prefer to maintain the ESM’s intergovernmental character on the one hand and are reluctant to give up the current form of representation on the IMF on the other. Although some significant improvements were made in line with recommendations formulated in the Presidents’ Report and the Commission’s Reflection paper, the Commission noted that some important gaps remain (see Communication from the Commission ‘Deepening Europe’s Economic Monetary Union: Taking stock four years after the Five Presidents’ Report’ of 12 June 2019). The Commission notably observed that convergence and competitiveness of the euro area could be fostered by further strengthening the resilience of eurozone Member States’ economies through targeted structural reforms and investment. To this end, the Commission proposed on 24 July 2019 a new regulation ‘on a governance framework for the budgetary instrument for convergence and competitiveness for the euro area’ (see COM(2019) 354 final) designed to respond ‘to the need to reinforce the coordination of the economic policies of the euro area and to the need to foster reforms and investment that address the challenges of the euro area as a whole and contribute to its economic and social convergence’ by providing ‘economic policy guidance for reforms and

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investment to be supported by the new budgetary instrument in line with the overall economic policy coordination framework of the Union’ (at 2).

1.6 The UK’s attitude towards the European Union The UK made its first application to join the then EEC in 1961, but this was rejected, mainly because of the opposition of De Gaulle, then President of France. A second application was made in 1967, but failed again due to France’s hostility towards British membership. In January 1973, following the resignation of De Gaulle, the UK acceded to the EEC, and the European Communities Act 1972 took effect on 1 January 1973. As the structure of the (now) EU underwent a number of changes in the course of its development, each treaty had to be ratified by every Member State. In 1988, UK Prime Minister Margaret Thatcher delivered a speech in Bruges setting out her view of Europe, which focused on opening the EU to Eastern European States and on criticising the intrusive nature of the European Commission. Whilst the pound joined the exchange rate mechanism of the European Monetary System in 1990, the UK made it clear that it would not join a single currency. In 1992 the UK ratified the Maastricht Treaty that established the EU, but not without turmoil, as the vote in Parliament almost brought down the UK Government. Since then the UK has been able to negotiate agreement that certain issues be appended in a protocol to be separately agreed upon (Social Chapter in the Maastricht Treaty) or that opt outs be specifically granted (see now Protocol No 20 on the Application of Certain Aspects of Article 26 of the Treaty on the Functioning of the European Union to the United Kingdom and to Ireland; Protocol No 21 on the Position of the United Kingdom and Ireland in Respect of the Area of Freedom, Security and Justice; and Protocol No 30 on the Application of the Charter of Fundamental Rights of the European Union to Poland and to the United Kingdom). This method allows EU States to enhance their cooperation (such as the incorporation of the Schengen Agreements into the Treaty of Amsterdam 1997) whilst giving the UK the right to opt out of participation in some policies. In 2000, as the EU institutions adopted the Charter of Fundamental Rights, the UK expressed its reservations about endowing it with legal status (though this was later given under the Lisbon Treaty) (see 4.6). Throughout this period of time the UK supported the Eastern enlargement of the EU, probably in the hope that a physical expansion of the Union would stymie further deepening of the European project. In 2008 the UK Parliament ratified the Treaty of Lisbon after a failed legal challenge to demand a referendum. In 2011 it passed the European Union Act, which not only requires any further transfer of powers to the EU to be accepted by way of referendum but also restates UK parliamentary sovereignty. In 2012 the Government announced a review of the balance of competences in order to assess the impact of EU powers and competences on the UK. The review was completed in December 2014. Moreover, in light of growing discontent with EU migration and what is viewed as a lack of (parliamentary) sovereignty over domestic issues, the British Prime Minister sent in November 2015 a letter to the President of the European Council seeking reform in four fields: economic governance, competitiveness, sovereignty and immigration. The European Council replied in February 2016 by agreeing on a new settlement for the UK within the EU to be effective as soon as the UK notified its intention to remain a member of the EU (EUCO 1/16 of

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19 February 2016). On 23 June 2016 a referendum on the UK’s membership resulted in the British population voting to leave the EU. By a letter dated 29 March 2017 the British Prime Minister notified the European Council of the UK’s intention to leave the European Union, thereby starting the process under Article 50 TEU. It must be noted that until the Treaty of Lisbon, the possibility of withdrawing from the EU was not made explicit in the Treaties. In line with the Article 50 TEU procedure, guidelines which ‘define[d] the framework for [the] negotiations … and set out the overall positions and principles that the Union will pursue throughout the negotiation’ (XT 21004/17 of 29 April 2017) were adopted by the European Council on 29 April 2017. Following the Commission recommendation (COM(2017) 218 final of 3 May 2017), the Council adopted Decision (EU, Euratom) 2017/… authorising the opening of negotiations with the United Kingdom of Great Britain and Northern Ireland for an agreement setting out the arrangements for its withdrawal from the European Union (XT 21016/17, ADD 1 REV 2 of 22 May 2017). The annex to this Decision contained the directives for the negotiation of an agreement with the United Kingdom of Great Britain and Northern Ireland setting out the arrangements for its withdrawal from the European Union. The European Council guidelines set out a two-phased negotiation process: phase 1 on the negotiations on the withdrawal; and phase 2 on the preliminary and preparatory discussions on a framework for future relations and transitional arrangements. As stated in para 10 of the negotiating directives of 22 May 2017, these were only intended for the first phase of the negotiations. Matters not yet covered by these directives and phase 2 are ‘part of subsequent sets of negotiating directives’. The negotiations under Phase 1 led to a draft Withdrawal Agreement (Agreement on the Withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community) including provisions on the financial settlement, the protection of the status and rights of EU citizens in the UK and UK citizens in the EU27, and a solution for preventing the return of the physical border between Northern Ireland and the Republic of Ireland, together with three protocols (the Protocol on Ireland/Northern Ireland, the Protocol on the Sovereign Base Areas in Cyprus, the Protocol on Gibraltar) and nine annexes ([2019] OJ C66I/1). Finalised on 14 November 2018, the Agreement was endorsed on 25 November 2018 at a European Council summit. However, as the UK Parliament rejected it on three occasions, the Prime Minister had to ask for a first extension until 30 June 2019 and a second until 31 October 2019. Following a change of governments in the UK, an amended/new Withdrawal Agreement together with a revised/new protocol on Ireland/Northern Ireland was agreed upon by the UK and the EU27 on 17 October 2019 ([2020] OJ L29/7). Its rejection in Parliament was followed by general elections on 12 December 2019 which produced a new majority in Parliament that eventually approved the Agreement on 23 January 2020. The UK then notified the EU on 29 January 2020 that it had ratified the Agreement. With regard to the EU, in accordance with Article 50(2) TEU, the Agreement was ‘concluded on behalf of the European Union by the Council, acting by a qualified majority, after obtaining the consent of the European Parliament’. Indeed, following the European Parliament’s consent given on 29 January 2020, the Council adopted the Agreement on 30 January 2020 (Council Decision (EU) 2020/135, [2020] OJ L29/1), thereby leading to its entry into force on 1 February 2020. The UK thus officially left the EU on 31 January 2020.

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The Agreement also contains provisional arrangements in order to bridge the time between the UK’s withdrawal from the EU and the entry into force of a new treaty outlining the relationship between the UK and the EU post-Brexit. According to Article 126 of the Withdrawal Agreement, the transition (also known as ‘implementation’) period runs until 31 December 2020 unless the Joint Committee established by the Agreement agreed, before 1 July 2020, to extend ‘the transition period for up to one or two years’ (Article 132 of the Withdrawal Agreement). This extension was not requested by the UK Government. As for Phase 2, the EU27 and the UK agreed on a Statement on the future relations between the UK and the EU (Political Declaration Setting out the Framework for the Future Relationship between the European Union and the United Kingdom ([2019] OJ C66I/185)) at the same time as the draft Withdrawal Agreement. As a result, the European Council adopted on 23 March 2018 Guidelines ‘with a view to the opening of negotiations on the overall understanding of the framework for the future relationship’ (EU XT 20001/18, 23 March 2018, para 5). However, owing to the stalemate in the UK Parliament, the Political Statement suffered the same fate as the draft Withdrawal Agreement: it was amended ([2020] OJ C34/1) and then adopted by the UK Parliament and the relevant EU institutions (see above). On 25 February 2020, the Council adopted, upon recommendation from the Commission, a Decision Authorising the Opening of Negotiations with the United Kingdom of Great Britain and Northern Ireland for a New Partnership Agreement (5870/20, 13 February 2020). According to preambular paragraph 7, the negotiations are based on the Political Declaration, ‘the previously agreed European Council’s guidelines, as well as statements and declarations, notably those of 25 November 2018’ (see in particular the Council’s Guiding Principles for Transparency in the Negotiations on the Future Relationship with the UK (XT 21010/20, 22 January 2020)). The Decision sets out that the new ‘partnership should cover trade and economic cooperation, and also other areas, in particular the fight against terrorism and international crime, as well as security, defence and foreign policy’ (preambular paragraph 4) and the Union negotiator is the Commission (Article 2).

1.7 Further reading Bulmer S and Lequesne C, The Member States of the European Union (OUP, 2013). Craig P, ‘The United Kingdom, the European Union and Sovereignty’ in Rawlings R, Young A and Leyland P (eds), Sovereignty and the Law, Domestic, European and International Perspectives (OUP, 2013) 165. Craig P, ‘Britain in the European Union’ in Jowell J and Oliver D (eds), The Changing Constitution, 7th edn (OUP, 2011) 92. Craig P, ‘The Treaty of Lisbon: Process, Architecture and Substance’ (2008) 33 EL Rev 137. Craig P, ‘Brexit, A Drama: The Interregnum’ (2017) 36 Yearbook of European Law 3. Craig P, ‘Brexit: A Drama in Six Acts’ (2016) 41 EL Rev 441. Craig P, ‘Brexit: A Drama: The Endgame – Part I’ (2020) 45 EL Rev 163. Dadomo C, ‘Brexit: Chronicle of a Crisis Foretold’ (2019) 5 International Comparative Jurisprudence 108. Dinan D, Ever Closer Union: An Introduction to European Integration, 4th edn (Lynne Rienner, 2010)

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Dougan M, ‘So Long, Farewell, auf Wiedersehen, Goodbye: the UK’s Withdrawal Package’ (2020) 57 CML Rev 631. Eeckhout P and Frantziou E, ‘Brexit and Article 50 TEU: A Constitutionalist Reading’ (2017) 54 CML Rev 695. Lagerhof E, ‘The British Withdrawal from the European Union and the Construction of a New Relationship’ (2018) 53 Tex Int’l L J 109. Pinder J, The Building of the European Union (OUP, 1998). Piris J-C, The Lisbon Treaty: A Legal and Political Analysis (Cambridge University Press, 2010). Tatham AF, Enlargement of the European Union (Kluwer, 2009). Tridimas T, ‘Article 50: An Endgame without an End?’ (2016) 27 King’s Law Journal 297. Venizelos E, ‘The Influence of the 2012 Restructuring of the Greek Public Debt on the Economic Governance of the Eurozone and on Public Debt Law’ (2020) 45 EL Rev 267. Wallace H, ‘The UK: 40 Years of EU Membership’ (2012) 8 Journal of Contemporary European Research 531. Summary

ry ma sum

The EU is an international organisation created by States. It has evolved through a dynamic process involving further integration and expansion. Undoubtedly, the EU is a unique entity and has a complex structure. Often based on similarities rather than differences, the Member States have managed to create an integrated Europe. However, they do not always agree on the extent of such integration or ‘deepening’ of the Union. Furthermore, the European integration process seems to continue to be led by States rather than by the people it is supposed to bring together. That being said, a combination of factors, including the withdrawal of the UK from the EU, may bring a set of new reforms.

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Have the initial aims of the EEC been achieved? Has the Lisbon Treaty brought the EU closer to its citizens? What are the reasons for amending the Treaties, and do these amendments contribute to the process of the European integration? What is the withdrawal procedure under the TEU?

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The Institutional Framework of the European Union

After reading this chapter, you will be able to understand: • • • •

the composition and functions of the seven EU institutions the sharing and division of powers and functions between such EU institutions the role played by other EU agencies and bodies how the principle of the separation of powers works in the EU.

2.1 Introduction Article 13 of the Treaty on European Union (TEU) stipulates that the powers endowed by the Member States to the EU shall be exercised by seven institutions. Due to the composition and structure of these institutions, they represent different views, the idea being that as a result, a wide range of opinions can be expressed. Further, as the EU has developed, over time its institutions have changed, some growing in importance, others relinquishing their powers. The EU has been criticised mainly on two issues: (a) lack of democracy; and (b) lack of the traditional separation of powers. The institutions of the EU are complex, and thus warrant a thorough examination of their composition and powers.

2.2 Democracy and separation of powers within the European Union 2.2.1 Democracy in the EU As mentioned in 2.1 above, the EU has often been criticised for its democratic deficit, notably because its institutions do not reflect the views of the EU citizens and were designed by States in view of the creation of an international organisation. This is certainly true of the institutions established by the predecessors of the EU. Democracy is now one of the values upon which the Union is founded (Article 2 TFEU). The basic premise is that all public authority emanates from the people: people should take part in, or supervise, law making. The TEU envisages two forms of democracy in the Union: (a) representative democracy (Article 10 TEU), whereby citizens as well as Member States are directly represented in the EU institutions. As the Court explains in Puppinck, Article 10(1) TEU ‘gives concrete form to the value of democracy referred to in Article 2 TEU’ (Case C-418/18 P Puppinck and Others v Commission EU:C:2019:1113, para 64). For example, under Article 14(3) TEU which is considered an implementation of the principle of representative

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democracy (Case C-502/19 Oriol Junqueras Vies EU:C:2019:1115, para 63), the citizens directly elect their representatives in the European Parliament. Member States, on the other hand, nominate their government representatives (who are accountable to the national parliaments) in the Council. The part played by the European Parliament in law making reflects at Union level the ‘fundamental democratic principle that the peoples should take part in the exercise of power through the intermediary of a representative assembly’ (Case 138/79 SA Roquette Frères v Council [1980] ECR 3333, para 33); (b) participatory democracy (Article 11 TEU), which enables citizens, Member States and other interested parties to air their views and make them known to the EU institutions through a range of formal and informal mechanisms. This form of democracy has the aim of leading to an open, transparent and regular dialogue among the stakeholders and is viewed as a complement to the principle of representative democracy (Puppinck, para 65). This appeal to dialogue is specifically reflected in the obligation imposed on the Commission to consult widely (by way of, for example, open hearings, green papers, impact assessment, white papers, online questionnaires and open forum on the internet) and take note of any initiative put forward by a significant number of citizens (Articles 11(3) and 11(4) TEU). The European Citizens’ Initiative allows groups of individuals to request the Commission to propose legislation in fields where the EU is competent to act. For example, the European Citizens’ Initiative on water and sanitation as human rights was the first one to be examined by the European Commission (see 19.3.2.2). Moreover, the Lisbon Treaty has given national parliaments a formal role to play in the management and running of the EU (Article 12 TEU). This is examined in further detail in 5.3.1.

2.2.2 The separation of powers in the EU The separation of powers and the rule of law are two principles relating to democracy. A classic understanding of the doctrine of separation of powers provides that the three types of government – executive, legislative and judicial – are allocated to three separate entities. This neat separation of powers is, however, difficult to apply to the European Union as the powers are distributed amongst various institutions. As the Court has explained, the European Treaties have set up a system for distributing powers among different [Union] institutions, assigning to each institution its own role in the institutional structure of the [Union] and the accomplishment of the tasks entrusted to the [Union]. (Case C70/88 European Parliament v Council (Re Chernobyl) [1990] ECR I-2041, para 21) To ensure though that no one institution dominates, a system of checks and balances has been put in place. As a result, the powers are often shared in the EU: the legislative power (ie making laws) is shared between the Commission, the European Parliament and the Council; the executive power (ie proposing and implementing laws) is shared between the Commission and the Council; the judicial power (arbitrating laws in court) is in the hands of the Court of Justice of the European Union (though the European Commission also plays an important role with regard to the application and enforcement of the law (see 7.2)). This is why the concept of institutional balance is to be preferred to that of separation of powers. Two further powers can be now added to the three mentioned above:

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external competences and governmental control of financial markets.

2.3 The political institutions of the European Union Article 13 TEU lists seven institutions, namely: • the European Commission (‘the Commission’) • the Council • the European Parliament • the Court of Justice of the European Union • the European Council • the European Central Bank, and • the Court of Auditors. The political institutions – the Commission, the Council, the European Parliament and the European Council – are discussed in further detail in 2.3.1–2.3.4 below; the Court of Auditors is examined in 2.4; the Monetary Union institutions – the European Central Bank and the European System of Central Banks – are discussed in 2.5. The CJEU is discussed in detail in Chapter 8 of this book.

2.3.1 The Commission The Commission is the best place to start an examination of the institutions of the EU, not because it is the most important – it certainly is not – but because it is the startingpoint for the making of EU law: it is the institution that springs to mind when the EU is mentioned, and it is entrusted with the promotion of the interests of the Union. It is based in Brussels, which is itself used as a shorthand term for the EU centre of power generally. 2.3.1.1

Constitution and appointment of the Commission The Commission finds its legal bases in Article 17 TEU and Articles 244–250 TFEU. Since 1 November 2004 it consists of 27 Commissioners, one from each Member State (Article 17 TEU). However, with the future enlargement of the EU in mind, and in the interest of improving efficiency, the Lisbon Treaty introduced a new scheme of composition for the Commission that should have started on 1 November 2014. According to Article 17(4) TEU there should be a system of rotation based on the principle of equality to allocate places on the Commission corresponding to two-thirds of the number of Member States and ‘reflecting the demographic and geographical range of all the Member States’. The implementing arrangements were to be adopted by the European Council (see 2.3.4) acting unanimously. However, in 2009 the European Council decided that the Commission would continue to exist in its current form. Commissioners are not representatives of their Member States. Legally, Commissioners are independent of the Member State that nominated them (Article 17(3) TEU; Article 245 TFEU). That being said, whilst Commissioners are not taking orders from their Member States, they keep a careful eye on matters affecting their home States. This is in fact useful to the Commission as a whole, as it enables it to get early warning of what will or will not be acceptable when drafting an act. From the perspective of Member States, there is often dissatisfaction that ‘their’ Commissioner is not protecting their interests.

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The Commission is a collegiate body. Its workings are explained in the 2014 Working Methods of the European Commission 2014-2019 (C(2014) 9004, 11 November 2014) and the procedure is regulated by its 2011 Rules of Procedure ([2000] OJ L308/26 as amended by [2010] OJ L55/60 and [2011] OJ L296/58). All decisions are issued in the name of the whole Commission, not individual Commissioners. Yet each Commissioner has a particular area of responsibility: finance, transport, environment, etc. In practice, straightforward matters will be dealt with by individual Commissioners, their decisions being rubber-stamped by the others. However, all controversial matters will be discussed by the whole Commission at its Wednesday meetings, and decisions will, if necessary, be taken by simple majority vote. These meetings are not public and discussions are confidential. Each Commissioner is assisted by a cabinet. On the administrative level, there are 42 Directorates-General in the Commission, each responsible for a particular policy area, headed by a Director-General and staffed by civil servants. These Directorates-General are then sub-divided into Directorates which are themselves comprised of units which vary in size and composition depending on their roles. There is a general public belief that the Commission is a huge bureaucracy, but this is not true. In fact, there are about 33,200 established posts, though there are also temporary, seconded and casual workers. This compares with the number of employees in an average-size County or City Council in the UK – and the Commission has the whole of Europe to look after. The President of the Commission is nominated by qualified majority voting European Council nominates Commission President-elect (QMV) by the European Council, taking account of the elections of the European Parliament (Article 17(7) TEU) and is European Parliament approves Commission President-elect then subject to approval by the European Parliament. For this reason, European Council by common accord with the Commission the President’s ‘mandate is essentially President adopts a list of candidate Commissioners political in nature’ (Case T-562/12 Dalli v Commission EU:T:2015:270, para 133). The current President is Ursula von der European Parliament approves proposed Commission Leyen from Germany. The other Commissioners are nominated by the President-elect and the European European Council appoints Commission Council, after being put forward by the Member States. Thereafter the whole Figure 2.1 Procedure for appointment of the Commission Commission is subject to the approval of the European Parliament, which usually questions the Commissioners individually before voting. However, the European Parliament cannot object to a specific Commissioner candidate, as it votes for or against the whole suggested Commission. However, it can exert enough political pressure to force a Member State to withdraw an unpopular nominee. Each Commissioner, including the President of the Commission, serves for a five-year term (renewable), which coincides with the term of the European Parliament. The kind of person chosen varies, but generally candidates have had a political career in their own Member State. The requirements for designation as member of the Commission are very broadly defined: nationality, competence and independence (Article 245 TFEU).

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The Commission as a whole can be removed by a vote of censure by the European Parliament (Article 17(8) TEU; Article 234 TFEU). This possibility was used in 1999, though unsuccessfully, as a result of which the Commission, headed by Jacques Santer, resigned. However, as mentioned above, it is not within the European Parliament’s powers to remove a specific Commissioner. That being said, under Article 247 TFEU the Commission or Council can seize the Court of Justice to ‘retire’ a Commissioner. To prevent the recurrence of a collective resignation, the Treaty of Nice provided for the possibility for the President of the Commission to request a member’s resignation if he or she had the approval of the rest of the Commission (see discussion in Dalli, para 140). The Lisbon Treaty went a step further as, under Article 17(6) TEU, the President of the Commission can ask a member to resign without having to seek approval of the majority of the commission. Article 17(6) does not prescribe either a specific form for the request (it can be oral or in writing) or procedure to be followed (Dalli, para 128). 2.3.1.2

Role of the Commission The role of the Commission is set out in Article 17(1) TEU: 1. The Commission shall promote the general interest of the Union and take appropriate initiatives to that end. It shall ensure the application of the Treaties, and of measures adopted by the institutions pursuant to them. It shall oversee the application of Union law under the control of the Court of Justice of the European Union. It shall execute the budget and manage programmes. It shall exercise coordinating, executive and management functions, as laid down in the Treaties. With the exception of the common foreign and security policy, and other cases provided for in the Treaties, it shall ensure the Union’s external representation. It shall initiate the Union’s annual and multiannual programming with a view to achieving interinstitutional agreements. Essentially, these duties involve coordinating, executive, management and supervisory functions in relation to the implementation of the European Union’s policies in the areas of competence attributed to the Union by the Treaties. (Dalli, para 133) The Commission formulates and suggests policy initiatives and legislative proposals (see 5.3.1). Indeed, the power of legislative initiative accorded to the Commission by Article 17(2) TEU and Article 289 TFEU – which reflects the principle of conferred powers, enshrined in Article 13(2) TEU, and, more broadly, the principle of institutional balance, characteristic of the institutional structure of the European Union – means that it is for the Commission to decide whether to bring forward a proposal for a legislative act. (Joined Cases C-643/15 and C-647/15 Slovak Republic and Hungary v Council EU:C:2017:631, para 146) Although it has the right of initiative, most proposals are on matters for which it has received instructions from the Council (2.3.2) or the European Council (2.3.4). Yet it remains the Commission’s task to put the proposals into legislative form, ie ‘to determine the subject-matter, objective and content of [the] proposal’ (Case C-409/13 Council v Commission (Macro-Financial Assistance) EU:C:2015:217, para 70), and it is under no obligation to obey the Council’s wishes. Undoubtedly, this power means that ‘the Commission is a key player in the legislative process’ (Case C-57/16 P ClientEarth

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v Commission EU:C:2018:660, para 88). As the Court has explained, the Commission also has, under the ordinary legislative procedure, ‘the power, as long as the Council has not acted, to alter its proposal or even, if need be, to withdraw it’ (Macro-Financial Assistance, para 74). Limits to this power of withdrawal have, however, been set by the Court (Macro-Financial Assistance, paras 76–79). The Commission can also put forward its own ideas, but with no guarantee of acceptance. The Commission acts as an executive of the Union. As described by the Court, [i]nasmuch as the Commission may be regarded, in the terms it uses to define itself, as the principal ‘executive organ’ of the new legal order of international law constituted by the European Union …, its members thus perform, as a body, functions which, according to the classical doctrine of the separation of powers, are within the province of the executive. (Dalli, para 134) The Commission has extensive rule-making powers, especially in relation to agriculture and trade, eg anti-dumping measures. Law-making powers may be categorised as those delegated by way of a legislative act (Article 290 TFEU) or implementing powers (Article 291(2) TFEU). With regard to such delegated acts, Article 290(1) TFEU explains that A legislative act may delegate to the Commission the power to adopt nonlegislative acts of general application to supplement or amend certain nonessential elements of the legislative act. The objectives, content, scope and duration of the delegation of power shall be explicitly defined in the legislative acts. The essential elements of an area shall be reserved for the legislative act and accordingly shall not be the subject of a delegation of power. Under Article 290(2)(a) TFEU, the European Parliament or the Council may revoke any such delegation. As for the implementing powers of the Commission, under Article 291(3) TFEU, their exercise can be controlled by rules and principles laid down in Regulation 182/2011 ([2011] OJ L55/13) (see further 5.4). The Commission drafts, manages and implements the EU budget. It drafts the budget within the overall guidelines agreed by the Council. It ensures that Member States pay their contributions, and is supposed to check that the money is spent properly. The Commission performs this duty under the supervision of the Council, the Parliament and the Court of Auditors (see 2.4). The Commission also administers four European funds: • the Social Fund • the Development Fund • the Agricultural Guidance and Guarantee Fund, and • the Regional Development Fund. As the guardian of the Treaties, the Commission ensures the proper application of the Treaties and other Union acts. When the time limit for implementing an EU act has been reached, the Commission will verify that Member States have implemented the act and, if they have not, has the power to initiate a procedure that might lead to a Member State being brought before the Court of Justice (see further 7.2). The Commission perceives its role in the enforcement of laws as being as much political as legal. It will not take legal action against a Member State until it has tried negotiation, persuasion and compromise. However, the Commission is not the only body

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responsible for the correct application of EU law; this task belongs even more so to the national authorities, and especially to the national courts (see 9.1). The Commission also represents the EU at the international level. Where the EU is engaged in international negotiations as an entity separate from the Member States, it is the Commission that conducts the negotiations, under the guidance of the Council (eg negotiations at the World Trade Organization (WTO)). This role is specifically recognised in the field of the common commercial policy by Article 207(3) TFEU, and the procedures for the exercise of this role are set out within Article 218 TFEU. The EU can become a party to treaties in its own right, and besides negotiating international agreements, the Commission is also entrusted with maintaining all appropriate relations with international organisations (Article 220 TFEU) (eg the United Nations and its agencies, the Council of Europe). The Commission fulfils this role through the High Representative of the Union for Foreign Affairs and Security Policy (currently Josep Borrell). The Commission also acts as the civil service of the EU, as it runs its everyday work and tends to act on the basis of simple majority votes (eg, competition policy and mergers control, the European Community Action Scheme for the Mobility of University Students (ERASMUS programme)). Formulates and proposes policy initiatives and legislative acts Ensures application of the Treaty and other measures (infringement procedure, seizure of the CJEU)

European Commission

Limited powers of independent decision making (eg delegated and implementing acts) Acts as an executive of the Union: implements EU policies (eg Common Agricultural Policy, ERASMUS) Represents the European Union outside

Manages and implements the budget

Figure 2.2 Role of the Commission

2.3.2 The Council 2.3.2.1

Configuration of the Council The Council is the most powerful institution in the EU and is composed of representatives of the Member States (Ministers). The Council finds its legal bases in Article 16 TEU and Articles 237–243 TFEU. In particular, Article 16 TEU specifies: 1. The Council shall, jointly with the European Parliament, exercise legislative and budgetary functions. It shall carry out policy-making and coordinating functions as laid down in the Treaties.

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2. The Council shall consist of a representative of each Member State at ministerial level, who may commit the government of the Member State in question and cast its vote. 3. The Council shall act by a qualified majority except where the Treaties provide otherwise. The Council comprises one representative from each Member State, authorised to commit and act on behalf of that State (Article 16(2) TEU). This also means that Ministers are accountable to their national parliaments. Thus, the Council can claim democratic legitimacy, as Ministers are accountable, through national parliaments, to their own electorates. The exact configuration of the Council depends on the subject matter to be discussed (Article 16(6) TEU). There are currently 10 configurations. For example, the term ‘Foreign Affairs Council’ is used when it is the Foreign Ministers of the Member States who attend, whilst ECOFIN (‘Economic and Financial Affairs’) refers to the meeting of the Finance Ministers. All other meetings are called Technical Councils, and consist of the Ministers for the particular subject under discussion (eg agriculture, transport, environment, etc). However, there remains a single Council in that, regardless of the configuration of the Council that adopts a decision, that decision is always a Council decision, no mention being made of the configuration adopted in any particular case. The Council has the support of a secretariat, based in Brussels, which consists of international civil servants recruited from Member States. Since the Treaty of Lisbon came into force, there is an overarching presidency for particular configurations within the Council, apart from the Foreign Affairs Council. Based on a system of equal rotation (Article 16(9) TEU), each presidency is determined by qualified majority voting (Article 236 TFEU). Acting as President is a tremendous opportunity for the politicians of a Member State, especially those of a small State. It is very hard work, but it gives the office-holder the chance to make a mark on the world stage. Most Member States like to set objectives to be attained during their candidate’s term of office, and may lose face if they fail to achieve these. 2.3.2.2

Function of the Council According to Article 16(1) TEU, the main function of the Council is passing legislation, and it is this that makes it the most important institution. It also has an important voice as regards policy development, coordination and harmonisation. Indeed, under Article 241 TFEU, the Council can ask the Commission to prepare proposals; in practice, the Council usually decides exactly what it wants and then asks the Commission to produce the formal legislative proposal. Articles 121 and 126 TFEU provide the Council with specific powers to coordinate the Member States’ economic policies, and it may impose sanctions in this connection. The Council also concludes international agreements between the EU and other States or international organisations, develops the Common Foreign and Security Policy and coordinates cooperation in the field of justice and criminal matters. All of the Council’s legislative deliberations are public, and most of its official documents are accessible to the public.

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in practice The Council is assisted by a body called by its French acronym, COREPER (Comité des représentants permanents), which was set up in 1958 but only formally recognised in the Merger Treaty of 1965. It is not an ‘institution of the [Union] upon which the Treaty confers powers of its own but an auxiliary body of the Council’ (Case C-25/94 Commission v Council EU:C:1996:114, para 26). It comprises representatives of the Member States (Articles 16(7) TEU and 240 TFEU). In fact, each Member State keeps the equivalent of an embassy in Brussels, headed by the permanent representative and staffed by national civil servants. The COREPER ‘ is responsible for preparing the work of the Council and for carrying out the tasks assigned to it by the latter’ (Joined Cases C-626/15 and C-659/16 Commission v Council EU:C:2018:925, para 60). Its main role consists in carrying out preliminary scrutiny of all the dossiers on the Council agenda, apart from agricultural issues that are left to be dealt with by the Special Committee on Agriculture. With this view, the COREPER works in two configurations: A items: COREPER I: sectoral and technical policy areas (staffed by deputy permanent representatives); and B items: COREPER II: issues that cover a range of policy areas and politically sensitive policy areas (staffed by permanent representatives from the EU Member States). The items on the agenda for the meetings of the Council reflect this division: ‘A items’ are approved without discussion following agreement within the COREPER, whilst ‘B items’ are open for discussion. This system enables the Council to focus its attention on the more politically sensitive issues.

2.3.2.3

Council voting procedures Under Article 238 TFEU, the Council can use three different voting procedures: (a) Unanimity – each Member State is given the power to veto a measure. It is used for the most sensitive issues, such as the admission of new Member States, harmonising taxes and deciding whether a State can join the euro. In cases where unanimity is required and one State votes against a proposal, the whole proposal fails. Abstention cannot be used by Member State to stop the adoption of an EU measure requiring unanimity (Article 238(4) TFEU). (b) Simple majority voting – this is used only for procedural matters, as it could lead to the large Member States being outvoted by the small Member States. (c) Qualified majority voting (QMV) – the QMV system is meant to introduce the concepts of democracy and efficiency in law-making. According to Article 16(3) TEU, QMV is the rule. Prior to 1 April 2017, each State had a number of votes, according to its size and importance, but this was replaced with a ‘double majority’ system, according to which each Member State has one single vote. Since 1 November 2014 a qualified majority is defined as at least 55% of the members of the Council, comprising at least fifteen of them and representing Member States comprising at least 65% of the population of the Union. (Article 16(4) TEU) What is more, to block a decision, there must be at least four Council members, as otherwise the majority is deemed to have been reached (Article 16(4) TEU). If the

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Council votes on a proposal that was not presented by the Commission or the High Representative of the Union for Foreign Affairs and Security, a ‘reinforced qualified majority’ is required (Article 16(4) TEU that refers to Article 238(2) TFEU). This means that a qualified majority is attained when the vote gathered is ‘at least 72% of the members of the Council, representing Member States comprising at least 65% of the population’ (Article 238(2) TFEU). In cases where one or more members of the Council do not take part in the vote as a result of an opt-out clause on the issue being voted upon, figures are adjusted accordingly. An abstention counts as a vote against.

2.3.3 The European Parliament 2.3.3.1

Composition of the European Parliament The European Parliament started life as a rather ineffectual body called the European Assembly, consisting of nominated individuals from the Member States. The most significant developments for this body were its change of name to ‘Parliament’ in 1962 (a change later formalised in the 1986 Single European Act) and the introduction of direct elections in 1979. However, the use of the term ‘Parliament’ is misleading. Usually a parliament is a jurisdiction’s main law-making body, a legislature, but the European Parliament is not such a body as it shares its legislative functions with other institutions (see 2.2.2 above). As the European Parliament is the only EU institution directly elected by the people of Europe it is endowed with democratic legitimacy. The main relevant legal provisions in relation to the European Parliament are Article 14 TEU and Articles 223–234 TFEU. ‘[I]ts composition must reflect faithfully and completely the free expression of choices made by the citizens of the European Union, by direct universal suffrage, as regards the persons by whom they wish to be represented during a given term’ (Junqueras Vies (2.2.1 above), para 83). Members of the European Parliament (MEPs) are directly elected by EU citizens, and the elections take place every five years (Article 14(3) TEU). The way MEPs are elected in their own States varies greatly, despite the fact that Article 223(1) TFEU provides for a uniform electoral procedure. There are currently 705 MEPs. The main criterion for allocation of seats is, broadly speaking, the population of the Member States concerned but it should be borne in mind that representation is degressively proportional (Article 14(2) TEU), that is, more populous Member States will have more seats in the European Parliament but there should be at least six and no more than 96 members for every Member State. Once elected, MEPs sit not by State, but by party group. In plenary sessions they sit in a hemicycle with parties of all types, from far left to far right, as MEPs are organised in cross-border political groupings (Article 10(4) TEU). These party groupings are increasingly gaining in importance. Indeed, in the 2014 elections the main European parties put forward candidates who became known by the German term Spitzenkandidaten (lead candidate). It was Jean-Claude Juncker, the Spitzenkandidat of the party that won the European Parliament’s elections, who was nominated and eventually appointed as President of the European Commission. However, this system of appointment which was part of a drive to promote democracy seemed to have been abandoned after the 2019 elections as Ursula von der Leyen, rather than the candidate for the largest party, was chosen by the European Council and then confirmed by the European Parliament.

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Functions of the European Parliament The European Parliament has four main functions: • legislative powers • budgetary powers • control of the Executive • the right to litigate. Legislative powers Through the ordinary and special legislative procedures (see 5.3), the European Parliament is involved in the adoption of legislative acts of the EU (Article 14 TFEU). It can also ask the Commission to submit a proposal (Article 225(2) TFEU). This does not mean that the Commission has to do so, nor that the Council will agree to the Parliament’s request, but it does give the European Parliament a formal input into the policy process. Budgetary powers The European Parliament has one of the main powers that a national parliament usually has, that of approving or disapproving the EU budget. The budget is drafted by the Commission, within overall financial guidelines agreed by the Member States, and adopted following a complex procedure set out in Article 314 TFEU. Since the coming into force of the Lisbon Treaty, the European Parliament enjoys the same rights as the Council as regards the adoption of the annual budget in its entirety. Control of the ‘Executive’ Controlling the Executive is central to any democratic political system. As explained in 2.3.1.1 above, the Commission is approved and can be removed by the European Parliament. Furthermore, the European Parliament receives a variety of reports from both the Commission and the Council. According to Article 233 TFEU, the European Parliament is allowed to discuss the Commission’s annual general reports, and according to Article 230 TFEU it has the power to question the Commission and the Council through a system of oral and written questions. It may also set up a Committee of Inquiry (Articles 226–227 TFEU) to look into violations or wrongful applications of Union law by Member States. One such committee was established, for example, at the time of the ‘mad cow disease’ outbreak in the mid-1990s, leading to the establishment of a European veterinary agency. Right to litigate Originally, the European Parliament did not have the right to litigate. Nonetheless, such a right was given to it by way of case law. The European Parliament is allowed to challenge another institution’s failure to act before the CJEU (Case 13/83 European Parliament v Council (Re Transport Policy) [1985] ECR 1513; Article 265 TFEU; Case C-70/88 European Parliament v Council (Re Chernobyl) [1990] ECR I-2041), in order either to protect its own prerogatives (Case 302/87 European Parliament v Council (Re Comitology) [1988] ECR 5615) or if it so wishes to challenge, pursuant to Article 263 TFEU (see 10.2), the legality of the acts adopted by institutions. Additional functions In addition to the four main powers discussed above, the European Parliament provides a mechanism to redress individual grievances. First, MEPs may be used by individuals as a point of contact for dealing with problems. How willing MEPs are to

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do this will be determined by the practice of the individual Member State and the electoral system in use. Secondly, according to Article 227 TFEU, EU citizens have the right to petition the European Parliament. A committee of 34 members will examine the petition, which may present an individual request, a complaint or an observation concerning the application of EU law, or an appeal to the European Parliament to adopt a position on a specific matter. Thirdly, the Ombudsman (Article 228 TFEU) who is appointed by the European Parliament examines complaints about maladministration committed by the EU institutions, with a view to reaching an amicable solution in the instant case (see 19.3.3). More generally, the Ombudsman reports to the European Parliament. The petitioner receives a report on the issue raised but cannot enforce the conclusions of the Ombudsman. That being said, European institutions largely comply with the conclusions of the Ombudsman, and those that do not are required to explain what actions they have taken six months after the report is issued. Further, since the Lisbon Treaty, like the Government of any Member State and the European Commission, the European Parliament is entitled to submit proposals to amend the Treaties to the Council (in case of an ordinary revision procedure under Article 48(2) TEU) and to the European Council (in case of a simplied revision procedure under Article 48(6) TEU).

2.3.4 The European Council From 1974 onwards, Heads of State or Governments of the Member States decided to meet up regularly, despite the lack of a legal basis for such meetings in the Treaties. In the Single European Act 1986, these meetings were formally recognised under the title of the European Council and the membership was laid down: the Heads of State or Government, the Foreign Ministers, the President of the Commission and one other Commissioner, to discuss matters outside the formal scope of the Treaties (eg international crises). According to Article 15(2) TEU, the European Council now comprises: • Heads of State or Government of the Member States • the President of the European Council • the President of the Commission, and • the High Representative of the Union for Foreign Affairs and Security Policy. The European Council is headed by a President for a term of two and a half years, who has been elected by qualified majority (Article 15(5) TEU). The current President is Charles Michel, who took over from Donald Tusk on 1 December 2019. The Lisbon Treaty recognised that the European Council was an institution on its own that should provide the Union with the impetus for reform and closer cooperation (Article 15(1) TEU). Although this institution, ‘according to Article 15 TEU, does not exercise legislative functions’ (Case T-192/16 NF v European Council EU:T:2017:128, para 43), all really important decisions are taken at its meetings (eg admission of new States, new treaties and major policy decisions like the introduction of the euro). The agenda can easily get cluttered with whatever politically sensitive issues are hot news at the time, such as the withdrawal of the UK from the EU at the moment. The meetings take place four times a year (or more, should the situation so require), and there is a combination of formal sessions, informal meetings and bilateral discussions. Decisions are taken by consensus under Article 15(4) TEU. The President also reports to the European Parliament (Article 15(6)(d) TEU).

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2.4 The European Court of Auditors The relevant legal provisions for the European Court of Auditors are Articles 285–287 TFEU. The Court of Auditors is an independent supervisory body whose task it is to examine the accounts of all revenue and expenditure of the Union. Despite its name, it is not a court, as it has no judicial functions. It comprises one national from each Member State. Both the Council and the European Parliament are involved in the appointment procedure. Under Article 286(1) TFEU, auditors must be chosen from among persons who belong or have belonged in their respective States to external audit bodies or who are especially qualified for this office. Their independence must be beyond doubt. Under Article 319 TFEU, the European Court of Auditors is responsible for auditing the EU’s accounts, making sure that all the money has been spent properly and can be accounted for. It then reports to the European Parliament, which has the power to vote formally to discharge the budget, ie declare itself satisfied with the records of how the money has been spent. On occasion, including 1984 and 1996, the European Parliament has refused to grant a discharge, because the auditors’ report revealed that money had gone astray and could not be traced. This virtually amounts to censuring the Commission.

2.5 The Monetary Union institutions: the European Central Bank and the European System of Central Banks The European Central Bank (ECB) is governed by Articles 282–284 TFEU and Protocol (No 4) on the Statute of the European System of Central Banks and of the European Central Bank. Based in Frankfurt (Germany), it is part of the European System of Central Banks, which comprises the ECB and the national central banks of all Member States irrespective of whether or not they have adopted the euro. Its key task is to conduct the Union’s monetary policy and maintain the euro’s purchasing power, and thus price stability in the euro area (also known as the ‘eurozone’). The euro area comprises the 19 EU Member States that have introduced the euro since 1999: Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Portugal, Slovakia, Slovenia and Spain. The ECB’s Governing Council is made up of the governors of the central banks of Member States whose currency is the euro, and the members of the ECB’s Executive Board. The Board consists of the President, Vice-President and four members (Article 283 TFEU), who are appointed by the European Council for a non-renewable eightyear term. The Governing Council formulates the Union’s monetary policy, whilst the Executive Board implements that policy and gives the necessary directions to the national central banks. The ECB’s activities are not funded from the EU budget but rather from the national central banks.

2.6 The Union’s advisory bodies In addition to the seven institutions listed in Article 13 TEU, the EU has created a range of entities, some of which are based on the Treaties whilst others have been set up by Union legislation. They all play an executive or advisory role.

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Three noteworthy advisory bodies that are mentioned in the Treaties are: the European Economic and Social Committee (EESC; Articles 300–304 TFEU). This is a long-standing body of the EU as it was included in the original Treaty of Rome. It comprises no more than 350 representatives of various groups of economic and social activity, appointed for a five-year renewable term by the Council after consultation with the European Parliament. Its opinions are nonbinding, though compulsory in some areas such as the Common Agricultural Policy, mobility of labour or transport, etc. • the Committee of the Regions (Articles 300 and 305–307 TFEU). The Committee consists of no more than 350 representatives appointed by the Council acting unanimously on a proposal from the Commission. As the Committee of the Regions is meant to represent regional and local bodies of the Member States, its members must either be elected members of regional or local authorities, or be politically answerable to an elected assembly. Its opinions are non-binding, but the Committee of Regions must be consulted in a number of areas such as vocational training, cross-border cooperation and transport, protection of the environment, etc. The Treaty of Lisbon has granted the Committee of the Regions additional rights, such as the right to start proceedings under Article 263 TFEU to defend its prerogatives (see 10.2.4.2), and under Protocol (No 2) on the Application of the Principles of Subsidiarity and Proportionality to ensure the correct application of the principle of subsidiarity (see 3.4). • the European Investment Bank (EIB; Articles 308–309 TFEU). This bank, owned by and representing the interests of the EU Member States, provides financial expertise for investment projects contributing to developing EU policy objectives. It further offers loans and financial support for such projects. There are also a range of EU agencies that vary in forms, shapes and sizes and perform different tasks in different policy areas (eg the Office for Veterinary and Plant Health Inspection, the European Environmental Agency, Europol and the European Union Agency for Fundamental Rights). As such they are not EU institutions but they assist the Commission and the Member States in fulfilling various specific tasks. Originally, the possibility of creating agencies stemmed from the Commission’s ability to delegate tasks to a separate body (see Case 9–10/56 Meroni & Co, Industrie Metallurgische, SpA v High Authority of the European Coal and Steel Community [1958] ECR 133). They are now created by secondary legislation. There are two broad types of agency, each with different characteristics and working in different sectors: regulatory agencies (that enact instruments to regulate sectors and sometimes have their own decision-making powers) and executive agencies (that are created, strictly supervised and dissolved by the Commission as they are set up for specific time periods to do a fixed job, often that of managing and implementing a programme). •

2.7 Further reading Chiti E, ‘An Important Part of the EU’s Institutional Machinery: Features, Problems and Perspectives of European Agencies’ (2009) 46 CML Rev 1395. Conway G, ‘Recovering a Separation of Powers in the European Union’ (2011) 17 European Law Journal 304. Curtin D, Executive Power of the European Union (OUP, 2009).

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Hodson D and Peterson J, The Institutions of the European Union, 4th edn (OUP, 2017). Lang JT, ‘Checks and Balances in the European Union: The Institutional Structure and the “Community Method”’ (2006) 12 European Public Law 127. Moravcsik A, ‘In Defence of the “Democratic Deficit”: Reassessing Legitimacy in the European Union’ (2002) 40 Journal of Common Market Studies 603. Nugent N, The Government and Politics of the European Union, 8th edn (Palgrave, 2017). Schmidt VA, ‘Re-envisioning the European Union: Identity, Democracy, Economy’ (2009) 47 Journal of Common Market Studies 17. Sieberson SC, ‘The Treaty of Lisbon and its Impact on the European Union’s Democratic Deficit’ (2007-2008) 14 Columbia Journal of European Law 445. Tsadiras A, ‘The Position of the European Ombudsman in the Community System of Judicial Remedies’ (2007) 32(5) EL Rev 607. Wallace H, Pollack M and Young A, Policy-Making in the EU, 6th edn (OUP, 2010). Summary

ry ma m u s

There are seven main institutions in the EU: • • • • • • •

the Commission the Council the European Parliament the European Council the Court of Justice of the European Union the European Court of Auditors, and the European Central Bank.

There is no separation of powers in the EU in the way this concept is understood at national level. One rather refers to the concept of ‘institutional balance’. Democracy in the EU is ensured through representative and participative democracy.

Test Your Knowledge

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It has been argued that the division of competences between (i) the European Parliament and the European Commission, (ii) the Council and (iii) the CJEU reflects broadly the classical division between the legislative, executive, and judicial powers. To what extent does this statement reflect the reality of the EU? By using the example of at least one of the EU institutions, critically analyse whether the EU lacks democratic legitimacy. By what means can the European Parliament control the activities of the other EU institutions?

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Division of Competences between the Union and the Member States

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Division of Competences between the Union and the Member States

After reading this chapter, you will be able to understand: • the distinction between powers and competences • the principle of conferral • the delineation of competences between the European Union and the Member States • the limits to the competences of the European Union.

3.1 Introduction International organisations such as the EU, which has been granted legal personality under Article 47 TEU, are endowed with powers and competences. Powers allow the EU to act in a certain way, eg legislative power. In contrast, a ‘competence’ refers to the ability and responsibility to act in a given field, and this usually relates to a particular area or policy specified in the Treaties. For example, the EU has the competence to legislate in the field of the customs union. Undoubtedly the two concepts are intertwined, and it is common to see them used interchangeably. After explaining the powers of the EU, and notably the principle of conferral, this chapter investigates the delineation of competences between the EU and the Member States. Lastly, it examines the limits to the competences of the EU.

3.2 Powers 3.2.1 Principle of conferral Member States confer upon the Union some of their sovereign powers, if and when they consider that their interests are better served by common action. As a result, in order for the EU to act, it must ensure that the Member States have conferred upon it the power to do so. Under the principle of conferral stipulated in Article 5(2) TEU, ‘the Union shall act only within the limits of the competences conferred upon it by the Member States in the Treaties to attain the objectives set out therein’. The principle of conferral applies both internally and externally (Opinion 2/94 [Accession by the Community to the European Convention for the Protection of Human Rights and Fundamental Freedoms] [1996] ECR I-1759, para 24 as reiterated in Case C-600/14 Germany v Council (Amendment of the Convention concerning International Carriage by Rail – COTIF) EU:C:2017:935, para 44). Competences not conferred upon the Union in the Treaties remain with the Member States. Consequently, for the EU to act, its actions must be founded upon a legal basis laid down in the Treaties. There are two consequences: • The EU does not have the power to confer powers on itself (this is known as Kompetenz-Kompetenz). In other words, its powers are delegated by the Member

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States (and can be reclaimed by Member States by, say, amending the Treaties) and it cannot expand its powers. • If the EU acts beyond its powers (an ultra vires act) then the action is invalid since the Union did not have the power to take it. It is therefore possible to bring an action for annulment before the CJEU under Article 263 TFEU (see 10.2). Thus powers are expressly delegated in the Treaties.

3.2.2 Implied powers Although powers are expressly delegated to the EU by the Member States, the ECJ has through its case law extended the existing powers of the EU, notably by using the theory of implied powers (Case 8/55 Fédération Charbonnière de Belgique v High Authority [1954-1956] ECR 292). Implied powers are defined as powers that do not result directly and expressly from treaty provisions but which are derived from general objectives set out in the particular treaty. In other words, such powers are granted because the exercise of such powers enables the European Union to achieve the objectives set out in the treaties. For example, the ECJ expanded the powers of the Union in the internal (eg Joined Cases 281, 283–285 and 287/85 Germany and Others v Commission [1987] ECR 3203) and the external (Case 22/70 Commission v Council (Re ERTA) [1971] ECR 263) spheres of action of the EU. The ERTA jurisprudence, which stipulates that if the EU has the internal powers in a specific area it then has the concomitant external powers, is now enshrined in Article 216(1) TFEU which refers to the EU’s power to conclude an agreement ‘where the conclusion of an agreement is necessary in order to achieve … one of the objectives referred to in the Treaties …’. That being said, the exercise of the EU’s external powers is not limited to such implied situations (see other situations mentioned in Article 216(1) TFEU; see also COTIF, paras 49–50).

se

ca ple In Case 22/70 Commission of the European Communities v Council of the European xam e Communities (ERTA) [1971] ECR 263, five of the six original Member States had signed a treaty on the working practices of international road transport crews (ERTA), which, however, did not enter into force owing to an insufficient number of ratifications. Renegotiations started at a later stage, but by this time the (then) European Community had adopted measures falling within that field. The Commission challenged the Council that had passed a resolution setting out the Member States’ position vis-à-vis the negotiations, on the basis that the European Community, rather than the individual Member States, should negotiate the treaty. In ERTA the ECJ explained that the internal powers of the EU should be mirrored externally. As a result, whenever the EU adopts common rules, Member States no longer have the right to undertake agreements with third States that would affect these rules. The ERTA jurisprudence allowed the ECJ to develop the doctrine of parallelism, whereby the internal powers of the EU are matched externally (Opinion 2/91 (Re ILO Convention 170) [1993] ECR I-1061 and Opinion 1/76 (Re Rhine Navigation Case) [1977] ECR 741).

3.2.3 Residual powers Besides the doctrine of implied powers discussed in 3.2.2 above, Article 352(1) TFEU stipulates: If action by the Union should prove necessary, within the framework of the policies defined in the Treaties, to attain one of the objectives set out in the

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Treaties, and the Treaties have not provided the necessary powers, the Council, acting unanimously on a proposal from the Commission and after obtaining the consent of the European Parliament, shall adopt the appropriate measures … This means that in the case where the Treaties have not provided the EU with the necessary powers to take appropriate measures to reach the aims specified in the Treaties, the Council can ‘authorise’ such powers, provided it follows a set procedure. This provision is referred to as the residual powers clause (also called the ‘flexibility’ clause’) since it can be used when the Treaties do not provide for a relevant legal basis. For example, the environmental policy was created using an EEC version of this provision in the early 1970s (see 11.2.2.2). The use of Article 352 TFEU, which could lead to a considerable expansion of the powers of the EU, is limited both by the Treaty itself (Article 352(3) and (4) TFEU) and by case law (see eg Opinion 2/94). Moreover, the new procedure in place to adopt measures under Article 352 TFEU has been tightened with the view to limiting the use of the procedure. Examples of recent uses of this provision can be found in Council Decision (EU) 2016/1859 on the Tripartite Social Summit for Growth and Employment and Repealing Decision 2003/174/EC ([2016] OJ L284/27), Council Decision 2014/ 866/EU on the Conclusion of an Agreement between the European Union and the Swiss Confederation concerning Cooperation on the Application of their Competition Laws ([2014] OJ L347/1) and Council Regulation (EU) No 390/2014 Establishing the ‘Europe for Citizens’ Programme for the Period 2014–2020 ([2014] OJ L115/3).

3.3 Union competences Once powers have been granted to the EU, it is imperative to consider exactly how they are divided between the EU institutions and the Member States. The TFEU refers to this as the allocation of competence. Until the Treaty of Lisbon there was no clear delineation of competences between the EU and the Member States. To enshrine such a division of competences in the Treaty became necessary as Member States complained about the ‘creeping competences drift’ in favour of the EU, and EU citizens feared that the Union would acquire more competences without democratic oversight. The Treaty of Lisbon takes a different approach to the allocation of competences depending on policy areas. Thus specific provisions in the Treaty form the basis for conferring competences upon the EU. Competences

Exclusive (Article 3 TFEU)

Shared (Article 4 TFEU)

Supportive

Coordinating (Articles 2(3) and 5 TFEU) Complementary (Articles 2(5) and 6 TFEU)

Figure 3.1

Competences of the EU and Member States

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3.3.1 Exclusive competences Article 2 TFEU distinguishes between exclusive and shared competences. Exclusive competences relate to specific areas where only the Union institutions can act. Member States are thus prevented from acting unilaterally or collectively in those areas. This provision endorses the doctrine of implied powers used in the ERTA case (see 3.2.2 above), as it enshrines the Commission’s external competence in the fields listed in Article 3 TFEU. The areas listed in that article include customs union, competition rules, monetary policy for those Member States whose currency is the euro, etc.

3.3.2 Shared competences The concept of shared competences relates to specific areas in which both the Union institutions and the Member States can act. Article 4 TFEU provides a non-exhaustive list of areas of competences, eg economic and social cohesion, consumer protection, transport, energy, etc. Areas not mentioned in Article 3 and Article 6 TFEU also fall within the remit of shared competences. Member States can act only if the Union has not yet exercised its right to act, or has decided to cease exercising its right to act (Article 2(2) TFEU). This means that a Member State cannot adopt measures contrary to the EU’s principles and values, or in breach of the principle of sincere cooperation (Article 4(3) TEU). This idea of pre-emption, which could have led to the EU exercising its rights and thereby grabbing all the competences for itself, is nonetheless tempered by: (a) exceptions to the rule (eg Articles 4(3) (research, technological development and space) and 4(4) TFEU (development, cooperation and humanitarian aid)). States cannot be prevented from exercising their competences in these areas. (b) Protocol No 25 on the Exercise of Shared Competence ([2012] OJ C326/307), the Sole Article of which stipulates that ‘the scope of this exercise of competence only covers those elements governed by the Union act in question and therefore does not cover the whole area’. (c) the principles of subsidiarity and proportionality (see 3.4 below).

3.3.3 Supportive competences There are two further categories of competences: (a) Coordinating competences. According to Articles 2(3) and 5 TFEU, the EU is allowed to issue guidelines and suggest initiatives to foster further coordination among the Member States in relation to economic policy, employment policy and social policy. (b) Complementary competences. In pursuance of Articles 6 and 2(5) TFEU, the EU is allowed to take action to support, coordinate or supplement the action of the Member States in fields such as health, industry, culture, tourism and education. In these fields Union action does not supersede the Member States’ competences and binding acts of the Union must not entail harmonisation.

3.3.4 The enhanced cooperation procedure The Treaties allow for differential integration, a multi-speed Europe in areas that do not fall within the exclusive competence of the EU (Joined Cases C-274/11 and C-295/ 11 Spain and Italy v Council (Unitary Patent) EU:C:2013:240, para 25). In such areas,

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where a limited number of Member States have decided to cooperate further, a specific and complex procedure under Article 329(1) TFEU has been set up. To avoid potential conflicts between EU law and the enhanced procedure, Article 20 TEU specifies that ‘[e]nhanced cooperation shall aim to further the objectives of the Union, protect its interests and reinforce its integration process’ and that it can only be authorised ‘as a last resort, when it has been established that the objectives of such cooperation cannot be attained within a reasonable period by the Union as a whole’. Both these requirements are subject to judicial review under Article 263 TFEU (see 10.2), as they were in the Unitary Patent Case. Moreover, Articles 326 and 327 TFEU explain that the procedure should not undermine the internal market and must respect the competences, rights and obligations of the non-participating Member States. The enhanced cooperation framework must remain open to non-participating Member States should they wish to join later (Article 328 TFEU). Although enhanced cooperation was originally introduced by the Amsterdam Treaty in 1997, it was used for the first time with the adoption of Council Regulation (EU) No 1259/2010 of 20 December 2010 implementing enhanced cooperation in the area of the law applicable to divorce and separation ([2010] OJ L343/10). Other subject-matters dealt via enhanced cooperation are the Financial Transaction Tax (Council Decision 2013/52/EU ([2013] OJ L22/11)), the unitary patent system (Regulation (EU) No 1257/2012 of the European Parliament and of the Council ([2012] OJ L361/1)), property regimes of international couples (Council Regulation (EU) 2016/ 1103 ([2016] OJ L183/1) and Council Regulation (EU) 2016/1104 ([2016] OJ L183/30)) and the establishment of the European Public Prosecutor’s office on the basis of the simplified enhanced cooperation procedure under Article 86(1) third subparagraph TFEU (Council Regulation (EU) 2017/1939 ([2017] OJ L 283/1)).

3.4 Limits to competences Article 5(1) TEU unambiguously spells out that the competences of the EU are limited by two principles: the principle of subsidiarity and the principle of proportionality. This is reiterated in Article 1 of Protocol No 2 on the Application of the Principles of Subsidiarity and Proportionality ([2012] OJ C326/206).

3.4.1 Principle of subsidiarity Subsidiarity is a concept that relates to the level of governance – EU, national, regional or local – at which action should be taken, the aim being that decisions are taken as closely as possible to the citizens of the EU. This principle is not new; it was initially articulated by the ECJ as a general principle of EU law (see 4.5) and is now enshrined in the Treaty and in Protocol No 2. The principle applies to all kinds of EU acts, except those that fall within the exclusive competence of the EU. Under the principle of subsidiarity, in areas that do not fall within its exclusive competence, the Union shall act only if and in so far as the objectives of the proposed action cannot be sufficiently achieved by the Member States, either at central level or at regional and local level, but rather, by reason of the scale or effects of the proposed action, can be better achieved at Union level (Article 5(3) TEU). Compliance with the principle of subsidiarity may be achieved by fulfilling two requirements:

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(a) Necessity test. For the EU to act, it must demonstrate that it is not possible for Member States individually or collectively to sufficiently achieve the objectives set out in the Treaty. (b) Greater benefits or added value test. Further, the EU must show that the circumstances are such that the objectives can be better achieved at Union level. Action by the EU institutions must bring added value over and above that which can be achieved by Member States (see Case C-84/94 United Kingdom v Council (Re Working Time Directive) [1996] ECR I-5755). In other words, there is a built-in bias in favour of action at the lowest possible level. The principle of subsidiarity is guaranteed by a number of procedural safeguards enshrined in the Protocol on the Application of the Principles of Subsidiarity and Proportionality and the Protocol on the Role of National Parliaments in the European Union ([2012] OJ C326/203): (a) The Commission must consult widely (at national, regional and local level) before proposing legislative acts. (b) All draft legislative acts must include a statement (usually featuring in the preamble) whereby the institution proposing the act demonstrates that the proposal complies with the principle of subsidiarity. The reasons given must be substantiated by qualitative and, wherever possible, quantitative indicators.  (c) National parliaments have been granted extensive powers to monitor the application of the principle of subsidiarity. Indeed, draft legislative acts, regardless of the originator, must be notified to national parliaments, which have eight weeks to send a response on why a particular act does not comply with the principle of subsidiarity. Each Member State has two votes (usually one for the upper and one for the lower chamber). Further: (i) The initiator of the draft legislative act must take into account the opinions of the national parliaments. (ii) If a third of all votes cast indicate that there is a violation of the principle of subsidiarity then the act must be reviewed by the Commission (‘yellow card’). This procedure was used for the first time in September 2012, when parliaments in 12 Member States declared a Commission proposal for a regulation concerning the exercise of the right to take collective action (‘Monti II’) to be in breach of the principle of subsidiarity. Instead of redrafting the proposal, the Commission chose to withdraw it. A second yellow card was activated in October 2013 regarding the proposal for a Council regulation on the establishment of the European Public Prosecutor’s Office. This time, the European Commission maintained the proposal and retained the original text unchanged and in its answer provided justifications for doing so (COM(2013) 851 final). A third yellow card was issued against a Commission proposal to reexamine the Posted Workers Directive (96/71/EC) in May 2016. After reviewing the reasoned opinions, the Commission decided to maintain the proposal on the basis that it did comply with the principle of subsidiarity (COM(2016) 128 final). The proposal was adopted in 2018 as Directive 2018/ 957 ([2018] OJ L 173/16). (iii) If a majority believes there is a violation then the Commission must provide a reasoned opinion as to why it still believes the act to be in conformity with the principle (‘orange card’). The reasoned opinion and those of all the national parliaments must be appended to the act and given to the European

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Parliament and the Council, which must first vote on whether the principle of subsidiarity has been complied with. If either the European Parliament or the Council believes it does not comply with the principle then the act is dismissed. The use of the orange card is available only when acts are passed under the ordinary legislative procedure (see 5.3). (d) The CJEU is competent to deal with actions on grounds of infringement of the principle of subsidiarity. Such actions might be brought by an EU institution (Article 263 TFEU; see 10.2), a Member State (Article 263 TFEU and Protocol on the Application of the Principles of Subsidiarity and Proportionality), a Member State on behalf of its national parliament (Protocol on the Application of the Principles of Subsidiarity and Proportionality) or the Committee of Regions to protect its prerogatives (Article 263 TFEU and Protocol on the Application of the Principles of Subsidiarity and Proportionality). Additionally, it might be possible for national courts and tribunals to refer a question of interpretation of the principle of subsidiarity through the preliminary ruling procedure under Article 267 TFEU (see Chapter 9). Unfortunately, the Court has shown great reluctance to grapple with the concept and has, so far, not struck down any legislation on the ground of subsidiarity (see eg Case C-84/94 Re Working Time Directive, above; Case C-377/98 Netherlands v European Parliament and Council [2001] ECR I7149; Case C-58/08 R (Vodafone Ltd, Telefónica O2 Europe plc, T-Mobile International AG, Orange Personal Communications Services Ltd) v Secretary of State for Business, Enterprise and Regulatory Reform [2010] ECR I-4999). (e) According to Article 9 of the Protocol on the Application of the Principles of Subsidiarity and Proportionality the Commission must submit an annual report to the European Council, the European Parliament, the Council and national parliaments on the application of Article 5 TEU. (f) When amending draft legislative acts, both the Council and the European Parliament must take into account the principle of subsidiarity.

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National Parliaments vote on principle of subsidiary 1/3 assert principle of subsidiarity violated (Yellow card)

1/2 assert principle of subsidiarity violated (only available under ordinary legislative procedure) (Orange card)

Proposal reviewed by the Commission

Commission required to issue a reasoned opinion

Commission can resubmit the proposal

Reasoned opinion and opinions of national parliaments appended to act and sent to European Parliament and Council European Parliament and Council vote on whether principle of subsidiarity is complied with

If European Parliament or Council finds violation then proposal rejected If European Parliament or Council finds no violation then examination of the content of the proposal follows

Figure 3.2 Procedural safeguards for the principle of subsidiarity

This undoubtedly demonstrates that the principle of subsidiarity is secured by mechanisms that can be used before, during and after the passing of a legislative act.

3.4.2 Principle of proportionality The principle of proportionality, which applies in relation to the form and content of the measure suggested by the European institutions, is a further limit on the competences of the EU. Under the principle of proportionality, the content and form of Union action shall not exceed what is necessary to achieve the objectives of the Treaties (Article 5(4) TEU). Each draft legislative act must contain an explanation as to how the principle of proportionality is complied with. The concept stems from the German legal system (Verhältnismässigkeit) and was initially adopted into EU law (eg Case 8/55 Fédération Charbonnière de Belgique v High Authority [1954-1956] ECR 292) as a general principle of law (see 4.5). It is now recognised as ‘one of the general principles of EU law’ which binds not only the EU legislator but also the national legislator, as the principle of proportionality ‘must be observed by any national legislation which falls within the scope of EU law or which implements that law’ (Case C-206/13 Siragusa v Regione Sicilia – Soprintendenza Beni Culturali e Ambientali di Palermo EU:C:2014:126, para 34).

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The principle requires the action to be both appropriate to attain its objectives and not go beyond what is necessary to achieve them (Case C-491/01 R v Secretary of State for Health, ex parte British American Tobacco (Investments) Ltd and Imperial Tobacco Ltd [2002] ECR I-11453). In practical terms this means that there is a need to show a link between the nature and scope of the measures taken and the objective in view: In the present case the general principle of proportionality must be the only test in determining whether the infringement of this fundamental right serves a purpose which is in itself acceptable, whether it is such as to enable this objective to be attained and whether it does not constitute an arbitrary and intolerable burden. (Case 114/76 Bela-Mühle Josef Bergman KG v Grows-Farm GmbH & Co KG (Re Skimmed-Milk Powder) [1977] ECR 1211, 1217) Consequently when an EU institution has a choice between various types of measures, it should opt for the one that is the least restrictive and the least burdensome, and the disadvantages of which must not be disproportionate to the aims pursued (Case C331/88 The Queen v Minister of Agriculture, Fisheries and Food and Secretary of State for Health, ex parte: Fedesa and Others [1990] ECR I-4023). Unlike the principle of subsidiarity (see 3.4.1 above), the CJEU has found a number of measures to be in contravention of the principle of proportionality.

se

ca ple In Case C-84/94 United Kingdom v Council (Re Working Time Directive) [1996] ECR Ixam e 5755, the UK Government argued that the Working Time Directive (2003/88/EC) had been adopted in breach of the principles of subsidiarity and proportionality. The ECJ held that with regard to the principle of subsidiarity the Directive was necessary, as the aim was to raise the levels of health and safety across the EU, and this could be achieved only by the EU rather than by the individual Member States. As for the principle of proportionality, the ECJ examined whether the means which [the directive] employ[ed] [were] suitable for the purpose of achieving the desired objective and whether they [did] not go beyond what [was] necessary to achieve it … and concluded that the measures in the Directive did not exceed what was necessary to achieve such objective.

3.5 Further reading Conway G, ‘Conflicts of Competence Norms in EU Law and the Legal Reasoning of the ECJ’ (2010) 11 German Law Journal 966. Craig P, ‘Subsidiarity: A Political and Legal Analysis’ (2012) 50(S1) Journal of Common Market Studies 72. Craig P, The Lisbon Treaty: Law, Politics and Treaty Reform (OUP, 2010). Davies G, ‘Subsidiarity: The Wrong Idea, in the Wrong Place, at the Wrong Time’, (2006) 43 CMLR 63. Fabbrini F and Granat K, ‘“Yellow Card, but not Foul”: The Role of the National Parliaments under the Subsidiarity Protocol and the Commission Proposal for an EU Regulation on the Right to Strike’ (2013) 50 CMLR 115.

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Fromage D, ‘The Second Yellow Card on the EPPO Proposal: An Encouraging Development for Member State Parliaments?’ (2016) 35 Yearbook of European Law 5. Harbo T-I, ‘The Function of the Proportionality Principle in EU Law’ (2010) 16(2) European Law Journal 158. Horsley T, ‘Subsidiarity and the European Court of Justice: Missing Pieces in the Subsidiarity Puzzle’ (2012) 50 Journal of Common Market Studies 267. Kiiver P, ‘The Conduct of Subsidiarity Checks of EU Legislative Proposals by National Parliaments: Analysis, Observations and Practical Recommendations’ (2012) 12(4) ERA Forum 535. Peers S, ‘Enhanced Cooperation: The Cinderella of Differentiated Integration’ in De Witte B, Ott A and Vos E (eds), Between Flexibility and Disintegration. The Trajectory of Differentiation in EU Law (Edward Elgar, 2017) 76. Weber A, ‘The Distribution of Competences between the Union and the Member States’ in Blank H-J and Mangiameli S (eds), The European Union after Lisbon (Springer, 2012) 311. Wohlfahrt C, ‘The Lisbon Case: A Critical Summary’ (2009) 10 German Law Journal 1277.

Summary

ry ma sum

The EU is based on the principle of conferral of powers, but the implied powers theory and the residual powers clause have been used to expand such powers. The Treaty of Lisbon distinguishes between three main types of competences: exclusive competences, shared competences and supportive competences. Any measure adopted by the EU institutions must be founded on a legal basis in the Treaty, as this is where the delineation of competences is stipulated and where the various policy areas for which the EU is competent are spelled out. The main limitations to the competences of the EU are the principle of subsidiarity (only with regard to shared competences) and the principle of proportionality. Whilst the latter principle has been used on numerous occasions by the ECJ to strike down legislation, the former remains a concept of political, rather than legal, application.

Test Your Knowledge

r you ge t s d te wle kno

(This is a fictional situation.) A heatwave in Europe in 2018 led to the death of about one-sixth of the cattle transported in road vehicles. In November 2019 the Commission issued a report suggesting ways to improve the transport of cattle across Europe. At about the same time, 1 million EU citizens, representing a significant number of Member States, have invited the Commission to propose a regulation to improve the treatment of farm animals in transit. A lobby group has submitted a proposal to the Commission, which is willing to initiate the process of adoption of such a piece of legislation. 1 Has the EU the competence to issue such a piece of legislation? 2 Should the EU legislate on the issue? 3 Can the EU negotiate and sign a treaty with the Republic of Belarus on the issue?

The Sources of European Law

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The Sources of European Law

After reading this chapter, you will be able to understand: • • • • • •

the primary sources that are the Treaties the secondary sources adopted under the Treaties the case law of the Court of Justice of the European Union the general principles of European Union law the fundamental rights as protected in the European Union other sources of European Union law, including soft law.

4.1 Introduction As noted by the European Court of Justice (ECJ), ‘the member States have limited their sovereign rights … and have thus created a body of law which binds both their nationals and themselves’ (Case 6/64 Costa v ENEL [1964] ECR 585, 593). This body of law comprises the sources of EU law that are collectively referred to as the acquis communautaire, as shown in Table 4.1. Acquis communautaire is a French term referring to the cumulative body of EU laws. It includes all the Treaties, acts passed by the European institutions and judgments laid down by the CJEU. The acquis is undoubtedly dynamic, constantly developing as the EU evolves, and fundamental. All Member States are bound to comply with the acquis communautaire. Moreover, acceptance of the acquis is one of the key criteria as regards the admission of new Member States (see 1.4). Regulations

Charter of Fundamental Rights

CJEU case law

Directives

The Treaties (TEU and TFEU)

Recommendations and Opinions

Decisions

General principles of EU law

International agreements

Table 4.1 Sources of EU law – the acquis communautaire

The sources of EU law form a comprehensive hierarchy of norms. Some, the primary sources (eg the Treaty on European Union (TEU) and the Treaty on the Functioning of the European Union (TFEU)), are more important than others, such as the secondary sources of law (eg regulations, directives). Moreover, sources may be categorised into legislative/enacted and judicial/non-enacted sources of law (see Table 4.2).

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Legislative/Enacted

Judicial/Non-enacted

Primary Sources

Secondary Sources

Secondary Sources

TEU

Listed in Art 288 TFEU (acts of CJEU case law the Institutions)

TFEU

International agreements

General principles

Charter of Fundamental Rights Table 4.2 Enacted and non-enacted sources of law in practice Following the Continental model, all legislation, information and notices are published in the Official Journal of the European Union (OJ), which consists of two series and a supplement: • the L Series (Legislation) – legislative acts, publication of which is required under the Treaties and other acts • the C Series (Communication) – any information that is not of a legislative character • the S Series (Supplement) – invitations to tender for public works and supply contracts. Since 1 January 2015, the numbering of EU legal acts in the L Series has changed. Documents are now presented in the following manner: (domain) YYYY/N where the domain may be EU, Euratom, CFSP, etc, followed by the year of the publication and the sequential number of the document for a given year.

4.2 Primary sources The EU is founded on treaties of equal value, the TEU and TFEU; these establish the framework and authority of the EU. A treaty is defined as an international agreement between States, usually in written form, that is binding upon States. It is the fundamental rule of international law that States obey the treaties they have ratified (pacta sunt servanda). Member States of the EU are thus bound by the terms of the TEU and the TFEU. Initially, there were three founding treaties, as there were three distinct communities: • the European Coal and Steel Community (ECSC) (expired on 23 July 2002; not published) • the European Atomic Energy Community (EURATOM) (Consolidated Version [2012] OJ C327/01), and • the European Economic Community (EEC) (Consolidated Version [2002] OJ C325/33) (see 1.4). Over time, the three communities became one, and in 1993, with the entry into force of the Maastricht Treaty, the EEC was renamed the ‘European Community’ (EC). As the EC branched out into new policy areas, as its institutions became more coordinated and as more Member States joined, the original Treaties were gradually amended. In 2004 a draft Treaty Establishing a Constitution for Europe proposed the codification of the Treaties into a single text, but this failed to be ratified and thus the paper trail of

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numerous treaties remained. The current Treaties – the TEU and TFEU, referred to as ‘The Treaties’ – were amended by the Treaty of Lisbon 2007 (which entered into force on 1 December 2009). These latest changes revised both the content and the organisation of the Treaties. in practice The Treaty of Lisbon enumerates the changes made to the previous treaties and is not used as such. As it would be too difficult to find the current version of a specific provision, bearing in mind the number of times it has been amended since the original Treaties, the European Union creates consolidated versions of the TEU and TFEU (as published in the Official Journal of the European Union ([2016] OJ C202/01 and [2016] OJ C202/47), which incorporate the modifications made by the Treaty of Lisbon. The most up-to-date versions of the consolidated Treaties are available on the website of the EU at .

The Treaties are self-executing (ie they do not need to be transposed into national law and are directly applicable). However, some Member States, such as the UK, Germany and Belgium, have historically followed a dualist system, which means that the Treaties must be formally implemented into domestic law by national legislation. In the UK, the European Communities Act 1972 (as amended) provides for the implementation of the Treaties. In monist States such as France and The Netherlands, once duly ratified the Treaties automatically become law without the need for further legislation. The Treaties contain the founding principles that govern and drive the EU, forming its constitution. In Opinion 1/91 [Draft Agreement between the EEC and the EFTA] [1991] ECR 6079, the ECJ stated: The [TFEU], albeit concluded in the form of an international agreement, nonetheless constitutes the constitutional charter of a [Union] based on the rule of law. As the Court of Justice has consistently held, the [Union] Treaties established a new legal order for the benefit of which the States had limited their sovereign rights, in ever wider fields, and the subjects of which comprised not only the Member States but also their nationals. (para 21) The Treaties resemble a constitution inasmuch as they set out the objectives of the EU, its competences and the institutional framework of the EU, as well as spell out some of the rights of EU citizens. Article 3 TEU lists the broad objectives of the EU, which mainly relate to the internal market (Article 3(3)), the area of freedom, security and justice (Article 3(2)), economic and monetary union (Article 3(4)), and relations with the wider world (Article 3(5)). Article 13(1) TEU establishes seven EU institutions: • the European Parliament • the European Council • the Council • the European Commission • the Court of Justice of the European Union • the European Central Bank, and • the Court of Auditors. See further Chapter 2.

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Although the Treaties do not contain an exhaustive list of the rights of EU citizens, they do confer a number of rights (eg the right not to be discriminated against on the basis of nationality under Article 18 TFEU, the right to seek work under Article 45 TFEU) that can be enforced directly in the national courts in accordance with the principle of direct effect (see 6.3). According to the principle of conferral enshrined in Article 5(1) TEU (see 3.2.1), the EU can act only in those areas in which it has competence (Articles 2–6 TFEU), which means that all the work carried out by the EU institutions must be done under the authority of the Treaties, the Protocol on the Application of the Principles of Subsidiarity and Proportionality, and the Protocol on the Role of National Parliaments in the European Union (see 3.3). As a result, if an EU institution acts ultra vires (ie beyond its conferred powers), its action may be challenged and struck down under the judicial review procedure laid out in Article 263 TFEU (see 10.2). New policy areas cannot be developed and legislated for without prior agreement of the Member States by way of treaty amendment. Amending the Treaties is a difficult and lengthy process because it is essentially a political process requiring the unanimous agreement of all 27 Member States, which will have variable sensitivity, contention and, sometimes, opposition towards certain policy areas. According to the ordinary revision procedures stipulated by Article 48(2)– European Parliament Commission Member States (5) TEU, any Member State, the propose European Parliament or the National parliaments Council Commission may submit to the Council proposals for amendment, which are forwards to forwarded to the European Council European Council whilst national parliaments are notified of their submission. If the European Rejection Approval Council accepts to examine the Convention convened by majority if EP accepts amendments, a Convention (comprising representatives of the national recommends parliaments, the Heads of State or Intergovernmental Conference Government of the Member States, the amendments introduced European Parliament and the Ratification by all States Commission) will be convened. The European Council may also, however, Amended treaty subject to the consent of the European Parliament, decide by a simple majority Figure 4.1 Revision procedure not to convene such a Convention but to set up an Intergovernmental Conference directly. Otherwise, it is the Convention that recommends the setting up of such a Conference. All Member States are invited to participate in the Intergovernmental Conference, and any amendment to the Treaties must be ratified by all the Member States in pursuance of their own domestic requirements. Amendments enter into force once all Member States have ratified them according to their constitutional arrangements. Article 48(6) and (7) TEU also provide for a simplified revision procedure. See further Figure 4.1. A number of protocols, annexes and declarations are attached to the Treaties. Whilst the protocols and annexes are an integral part of the Treaties (Article 51 TEU),

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declarations are legally effective only if they are adopted by the Council. There are three types of declarations: • declarations concerning provisions of the Treaties • declarations concerning protocols annexed to the Treaties, and • declarations by Member States explaining their position in relation to a specific provision or issue. in practice For the purpose of the study of EU law, the most notable protocols are Protocol No 1 on the Role of National Parliaments in the European Union, Protocol No 2 on the Application of the Principles of Subsidiarity and Proportionality, and Protocol No 30 on the Application of the Charter of Fundamental Rights of the European Union to Poland and to the United Kingdom. The most relevant declarations are Declaration No 1 concerning the Charter of Fundamental Rights of the European Union, Declaration No 17 concerning Primacy, and Declaration No 18 in Relation to the Delimitation of Competences.

Acts of accession are considered as primary sources of EU law. In a number of cases, the Court stated that their Annexes were primary law too as they ‘are the subject of an agreement between the Member States and the applicant State’ (Joined Cases 31 and 35/86 Levantina Agricola Industrial SA (LAISA) and CPC España SA v Council EU:C:1988:211, para 12; see also Case C-572/15 F Hoffmann-La Roche AG v Accord Healthcare OU EU:C:2016:739, para 30).

4.3 Secondary sources Secondary sources are by far the most substantial part of EU law. Indeed, the Treaties provide for the creation of five types of secondary sources of EU law under Article 288 TFEU, known as the legal acts of the Union (EU acts): To exercise the Union’s competences, the institutions shall adopt regulations, directives, decisions, recommendations and opinions. It must be noted that the sequence in which these acts are listed in Article 288 TFEU does not provide a hierarchy. That being said, the Treaty of Lisbon introduced a hierarchy among secondary sources, reflected in Articles 289, 290 and 291, creating three types of norms: legislative acts, delegated acts and implementing acts, the latter two being non-legislative acts. The legal effect of an EU act depends upon its specific nature. It is thus essential to be aware of the legal characterisation of the act in order to assess, for example, whether it is binding and whether it can be challenged under Article 263 TFEU (see 10.2). It must be borne in mind that under all three types of norms, it is possible to find regulations, directives and decisions.

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4.3.1 Legislative and non-legislative acts 4.3.1.1

Legislative acts Legislative acts, as stipulated in Article 289 TFEU, are acts that must be adopted in accordance with the (ordinary or special) legislative procedure (see further 5.3).

4.3.1.2

Non-legislative acts Delegated and implementing acts are non-legislative acts because they have not been adopted following a legislative procedure. They are sometimes referred to as ‘tertiary legislation’ or ‘tertiary acts’ in academic literature, resolutions of the European Parliament, reports of the UK Parliament (see eg House of Commons – European Scrutiny Committee, EU Withdrawal: Transitional Provisions and Dispute Resolution, HC 763, 20 March 2018, paras 33–38), explanatory memorandums to draft delegated regulations of the Commission (see eg Commission Delegated Regulation …/… supplementing Regulation (EU) 2016/429 of the European Parliament and the Council, as regards rules for the prevention and control of certain listed diseases, C(2019) 4057 final, 17 December 2019), a Communication from the Commission (Completing the Better Regulation Agenda: Better solutions for better results, COM(2017) 651 final, 24 October 2017, section 2.2) and an opinion of an Advocate General (see Opinion of AG Sharpston, Case C-239/17 Teglgaard and Fløjstrupgård I/S v Fødevareministeriets Klagecenter EU:C:2018:328 para 74). However, there does not seem to be any agreement as to whether this notion covers not only implementing and delegated acts but also other acts. The only use of the term in a legally binding document is found in a UK Act of Parliament (see s 3(2)(a) of the European Union (Withdrawal) Act 2018) which refers to ‘EU tertiary legislation’. It is to be noted, however, that Articles 290 and 291 TFEU do not establish the sole legal framework under which certain delegated and executive powers may be attributed. As the Court put it in Case C-270/12 United Kingdom v Parliament and Council (European Securities and Markets Authority) EU:C:2014:18, delegated and executive powers may also be conferred upon Union bodies, offices or agencies even though there is no specific treaty provision to that effect (paras 77–86). The majority of Union legal acts are adopted by the Commission either by means of delegated or implementing acts (see Commission, Proposal for a regulation of the European Parliament and of the Council amending Regulation (EU) No 182/2011 laying down the rules and general principles concerning mechanisms for control by Member States of the Commission’s exercise of implementing powers, 14 February 2017 (COM(2017) 85 final)). The widespread use of delegated and implementing acts is due to the fact that they allow for the speedy, efficient and flexible adjustments and implementation of legislation, ensure that technical aspects of the legislation are left to be dealt with by experts, and enable Member States to control the Commission whilst it is exercising its implementing powers. As a result, there is virtually no area of EU activity that does not have some delegated and/or implementing acts. According to Article 290 TFEU, delegated acts are enacted by the Commission to supplement or amend non-essential elements of the legislative act. However, the Commission can act only if the original legislative act allows it to do so. Therefore, the legislative act must explicitly define ‘not only the objectives but also the content, scope and duration of the delegation of power’ (Case C-696/15 P Czech Republic v Commission EU:C:2017:595, para 48). The Court has specified that the definition of the

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power must be precise enough to clearly indicate the limits of the Commission’s power and so enable this power to be reviewed by the CJEU (Joined Cases C-154/04 and C155/04 The Queen, on the application of Alliance for Natural Health and Nutri-Link Ltd v Secretary of State for Health and The Queen, on the application of National Association of Health Stores and Health Food Manufacturers Ltd v Secretary of State for Health and National Assembly for Wales EU:C:2005:449, para 90; Czech Republic v Commission, para 49). The legislator is not allowed to grant a delegation of power relating to essential elements (Czech Republic v Commission, para 76), and it is not up to the legislator alone to decide what falls within the ambit of ‘essential elements’. Rather, the categorisation of such elements ‘must be based on objective factors amenable to judicial review. Account must be taken of the characteristics and particular features of the field concerned’ (para 77). Implementing acts are acts that the Commission – and sometimes the Council – can adopt under Article 291 TFEU as part of their implementing powers. Such powers enable the Commission to adopt general or individual measures that give effect to the rules laid down in a legislative act. The Commission cannot add, insert, delete or modify anything in the legislative act. In this case, the Commission uses the comitology system under Regulation 182/2011 ([2011] OJ L55/13). Under this procedure, the Commission must seek the opinion of a committee comprising State representatives on proposed measures (see further 5.4). Article 2 of the Comitology Regulation lays down two procedures: (a) the examination procedure used for acts of general scope and for acts potentially having an important impact relating to, eg, the environment, security and safety, or protection of the health or safety, of humans, animals or plants; and (b) the advisory procedure used for all other implementing acts. in practice Examples of delegated act Commission Decision 2014/955/EU amending Decision 2000/532/EC on the list of waste pursuant to Directive 2008/98/EC of the European Parliament and of the Council ([2014] OJ L370/44) was adopted in pursuance of Article 7(1) of the Waste Framework Directive (Directive 2008/98/EC on waste and repealing certain Directives ([2008] OJ L312/3)) which specifies that ‘[t]he measures designed to amend non-essential elements of this Directive relating to the updating of the list of waste established by Decision 2000/532/EC shall be adopted in accordance with regulatory procedure with scrutiny referred to in Article 39(2)’; its Article 7(7) explains that ‘[t]he Commission shall ensure that the list of waste and any review of this list adhere, as appropriate, to principles of clarity, comprehensibility and accessibility for users, particularly small and medium-sized enterprises (SMEs)’. Another example of a draft delegated act is the Commission delegated regulation …/ … supplementing Regulation (EU) 2016/429 of the European Parliament and of the Council as regards rules for entry into the Union, and the movement and handling after entry of consignments of certain animals, germinal products and products of animal origin (C(2020) 416 final, 30 January 2020).

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Example of implementing act The Commission was able to adopt the Implementing Regulation 2016/1245 setting out a preliminary correlation table between codes of the Combined Nomenclature provided for in Council Regulation (EEC) No 2658/87 and entries of waste listed in Annexes III, IV and V to Regulation (EC) No 1013/2006 of the European Parliament and of the Council on shipments of waste ([2016] OJ L204/11) because Article 50(4e) of the Regulation No 1013/2006 on shipments of waste ([2006] OJ L190/1 but see consolidated version of 1 January 2018) states that ‘[b]y 18 July 2015, the Commission shall adopt, by means of implementing acts, a preliminary correlation table’ and ‘shall maintain that correlation table up-to-date’.

Legislative acts (Article 289(1) and (2) TFEU)

Opinions and recommendations

Non-legislative acts

Delegated acts (Article 290 TFEU)

Nature of legal acts

Implementing acts (Article 291 TFEU)

Figure 4.2 Legal acts of the EU

4.3.2 Validity of EU acts In order for an EU act to be valid, certain requirements need to be fulfilled. The act must: • address an issue that is within the competences of the EU • contain a reference to a legal basis (Article 296 TFEU) • contain a reference to a preliminary act (Article 296, second paragraph TFEU) • include a statement of the reasons why this act is necessary (Article 296, second paragraph TFEU; Case 24/62 Germany v Commission (Re Brennwein) [1963] ECR 63) • be signed by the appropriate person/institution, and • be published in the Official Journal of the European Union or notified to the relevant addressee.

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Failure to fulfil all these requirements means that the act can be challenged before the CJEU, which Legal Basis can declare it void (see 10.2). In particular, the Court has explained that the obligation to indicate a legal basis is ‘justified … by the need for the Specific General Court to be able to exercise its power of judicial review …’ (Case C-687/15 Commission v Council Field in which action EU:C:2017:803, para 52). Article 114 TFEU by EU is possible In many areas of EU competence, the Treaties stipulate the type of legal act to be adopted. When Type of act made no type is specified, Article 296, first paragraph Article 115 TFEU possible TFEU explains that the institutions shall select it on a case-by-case basis, in compliance with the applicable Procedure to follow Article 352 TFEU procedures and with the principle of proportionality. Sometimes degree The choice of the appropriate legal basis has of harmonisation constitutional significance (Joined Cases C-626/15 and C-659/16 Commission v Council Figure 4.3 Legal basis of an EU act EU:C:2018:925, para 48), notably because it determines whether the EU has competences in the field, which law-making procedure is used (ordinary or special legislative procedure), which institutions will be involved in the law-making procedure (Council, European Parliament, national parliaments, etc), how the Council votes (unanimity, single majority, qualified majority voting), the extent of the European Parliament’s participation (see 5.3) and the content of the act itself, as the EU is not allowed to legislate in fields in which it is not competent (see 3.3). Moreover, failure to use the correct legal basis means that the act can be challenged and declared void (Case C-376/98 Germany v European Parliament and Council (Re Tobacco Advertising) [2000] ECR I-8419). In other words, the CJEU has the last word as to whether a particular EU act was passed using the appropriate legal basis. When a measure pursues several aims or comprises several components then the Court will ascertain what is ‘the main or predominant purpose or component’ of the measure (Joined Cases C-626/15 and C-659/16 Commission v Council EU:C:2018:925, para 77) as it will only exceptionally accept that a measure is founded on several legal bases (para 78).

4.3.3 Article 288 TFEU Among the five legal acts stipulated in Article 288 TFEU, three of them, regulations, directives and decisions, are legally binding (see 4.3.3.1 below). Non-legally binding EU acts are discussed in further detail in 4.3.3.2 below.

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4.3.3.1

Binding EU acts: regulations, directives and decisions Article 288 TFEU

Binding

Regulations

Directives

Non-binding

Decisions

general application

binding on Member States

binding on addressee

directly applicable

implemented through national legislation

directly applicable

provide uniformity

provide harmonisation

Recommendations

Opinions

Figure 4.4 Binding and non-binding EU acts

Regulations Article 288 TFEU explains that [a] regulation shall have general application. It shall be binding in its entirety and directly applicable in all Member States. Regulations are perhaps the most powerful type of EU act because they can be used to achieve uniformity in law across the Union. Member States usually do not like regulations because they are outside their control. Regulations have three key characteristics: • they are of general application as they are ‘applicable not to a limited number of persons, defined or identifiable’ (Joined Cases 789–790/79 Calpak SpA v Commission [1980] ECR 1949, 1961) ‘but to categories of persons viewed abstractly and in their entirety’ (Joined Cases 16–17/62 Confédérations de producteurs de fruits et légumes and Others v Council [1962] ECR 471, 479); • they are binding in their entirety. Member States cannot choose to apply regulations in an incomplete or selective manner (Case 128/78 Commission v United Kingdom (Tachographs) [1979] ECR I-419, para 9); and • they are directly applicable, which means that they do not need to be transposed into national law and that national implementation measures are invalid (Case 34/ 73 Fratelli Variola SpA v Amministrazione italiana delle Finanze [1973] ECR 981). As a consequence, regulations can be applied by the domestic courts as soon as they become operative. Directives In contrast to a regulation:

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A directive shall be binding as to the result to be achieved upon each state to which it is addressed, but shall leave to the national authorities the choice of form and methods. (Article 288 TFEU) Directives are used to encourage harmonisation in law across the EU, but they leave the method of achieving this to the Member States, thereby providing them with some flexibility. This explains why directives are binding as to the result. Member States are left to decide the form and method of achieving the end result, though in some instances directives can contain specific provisions that leave little discretion to the Member States. In other words, directives are not directly applicable as they must first be transposed into national law to be given legal effect. In some instances there is no need for national authorities to take action as national law or principles already cover the subject matter of the directive in the same way as the directive does (Case 29/84 Commission v Germany EU:C:1985:229, para 23). In this case, national law or principles must be sufficiently precise and clear, and the persons concerned by the law or principles must be made aware of their rights and be able to rely on the law or principles before national courts (para 23). When transposing a directive, Member States are not obliged to use ‘precisely the same words in a specific express legal provision of national law; a general legal context may be sufficient if it actually ensures the full application of the directive in a sufficiently clear and precise manner’ (Case 247/85 Commission v Belgium EU:C:1987:339, para 9). The transposition of the directive must have ‘unquestionable binding force’, as well as be formulated with the specificity, precision and clarity required in order to satisfy the need for legal certainty, which requires that, in the case of a directive intended to confer rights on individuals, the persons concerned must be enabled to ascertain the full extent of their rights. (Case C-427/07 Commission v Ireland EU:C:2009:457, para 55) Member States will be given a certain time within which to implement a directive into their own law, depending on how difficult that will be – anything from months to years (see eg Directive 2013/32/EU of the European Parliament and of the Council of 26 June 2013 on common procedures for granting and withdrawing international protection ([2013] OJ L180/60) with a transposition deadline of 60 months). The average period of transposition in 2018 was 19 months (European Commission, Monitoring the Application of European Union Law 2018 Annual Report, Part I: General Statistical Overview, at 24). A directive will enter into force on the date specified in the directive or, if no date is stipulated, 20 days after its publication in the Official Journal. If a Member State fails to enforce the directive by the implementation deadline, it can be subject to enforcement proceedings by the Commission under the provisions in Articles 258–260 TFEU (see 7.2). Decisions According to Article 288 TFEU, [a] decision is binding in its entirety upon those to whom it is addressed. A decision is not really a general law, but is used to give legal effect to a ruling affecting one Member State or even an individual company. Decisions are usually addressed to a Member State, as in the case of Plaumann (Case 25/62 Plaumann and Co v Commission [1963] ECR 95, in which Plaumann challenged a decision addressed by the Commission to Germany – see 10.2.4.3), or to a natural or legal person (eg, in

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competition law cases such as Case T-201/04 Microsoft Corp v Commission [2007] ECR II-3601 – see 17.3), and they will be binding upon the addressee upon notification. The Court has adopted a formal approach of the definition of an ‘addressee’ ‘as referring to the person designated by that act as being its addressee’ and not including someone who has received a copy of the act (Case C-281/14 P Società per l’aeroporto civile di Bergamo-Orio al Serio (SACBO) SpA v Commission and Agence exécutive pour l’innovation et les reséaux EU:C:2016:46, para 34). However, a decision that does not specify those to whom it is addressed must be published in the Official Journal and will enter into force on the date stipulated by the decision, or, if there is no such date, on the 20th day following publication in the Official Journal (Article 297(2) TFEU). 4.3.3.2

Non-binding EU acts: recommendations and opinions Article 288 TFEU also provides for two types of acts that are not legally binding, recommendations and opinions: Recommendations and opinions shall have no binding force. According to case law, an act is binding when it ‘brings about a distinct change in the legal position of a party’ (Case 60/81 IBM v Commission [1981] ECR 2639, para 9). They are sometimes referred to as ‘official soft law’. These legal instruments are adopted following a specific procedure, usually contained in the rules and procedures of the relevant institution. For example, the CJEU has, ‘in continuation of the Rules of Procedure of the Court of Justice’, adopted the Recommendations to national courts and tribunals in relation to the initiation of preliminary ruling proceedings ([2018] OJ C257/1) (see 9.5). In line with Article 17(1) TEU, the Commission can, in the general interest of the Union, formulate recommendations or deliver opinions. Although these are forms of soft law, ie non-legally binding, they can be used to clarify the meaning of legal provisions and often indicate how the law may develop in the future. They can be endowed with persuasive authority if they are referred to by the CJEU. In contrast, they must be taken into account by national courts when interpreting EU measures (Case C-322/88 Grimaldi v Fonds des Maladies Professionnelles [1989] ECR 4407, para 18, and Case C-410/13 ‘Baltlanta’ UAB v Lithuania EU:C:2014:2134, para 64).

4.3.4 Other acts Besides the acts mentioned under Article 288 TFEU, there are various forms of acts in EU law. 4.3.4.1

Other binding acts outside Article 288 TEU Some acts find their basis in the TEU and are legally binding such as: • acts relating to the external policies and actions of the EU, such as decisions under Articles 22, 29 and 31 TEU; • acts adopted in the framework of enhanced cooperation under Article 20 TEU or 86(1) third subparagraph TFEU (see 3.3.4).

4.3.4.2

Soft law EU institutions also produce together or separately a great variety of documents that set out procedures, assist in interpreting the law, set out the position of an institution, etc.

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The acts of the organisation and running of the institutions, such as interinstitutional agreements (eg the Framework Agreement on Relations between the European Parliament and the European Commission ([2010] OJ L304/47) and the Interinstitutional Agreement on Better Law-Making ([2016] OJ L13/1) (see 5.2.1)) are examples of soft law instruments drafted by several EU institutions acting together. Whether such acts are legally binding between the institutions depends on whether they ‘intended to enter into a binding commitment towards each other’ (Case C-25/94 Commission v Council [1996] ECR I-1469, para 49). The Council adopts resolutions and conclusions after a debate during a meeting. Their purposes are varied: they can express a political position, ask the Commission to prepare a proposal, set a coordinated position between the EU and its Member States, coordinate Member States’ actions, invite Member States or institutions to take action, etc. Whether they are legally binding can only be ascertained by examining their contents. Examples of resolutions and conclusions of the Council are the Council Conclusions on EU Priorities in UN Human Rights Fora in 2020 (5982/20, 17 February 2020) and the Council Conclusions on COVID-19 (13 February 2020) (6038/ 20, 23 February 2020). In contrast, the conclusions of Presidents of the Council only reflect their views and are not legally binding. The Commission is probably the most prolific institution in producing acts that do not fall within the Article 288 nomenclature: • communications, notices and guidelines of the Commission. Some of them provide guidance on how to interpret legislation or case law and thus tend to refer to the relevant treaty provisions and case law (eg Communication from the Commission – Implementation of Article 260(3) of the Treaty ([2011] OJ C12/1) on fines for non-compliance with a CJEU judgment, see 7.2.1.2; Guidelines on vertical restraints ([2010] OJ C130/01) and Guidelines on the application of Article 101 TFEU to horizontal co-operation agreements ([2011] OJ C11/01), see 17.2.5.2; Communication notice on technical guidance on the classification of waste ([2018] OJ C124/1); Commission notice on the definition of relevant market for the purposes of Community competition law ([1997] OJ C372/5, see 16.3.2); Communication from the Commission concerning the consequences of the judgment given by the Court of Justice on 20 February 1979 in case 120/78 (‘Cassis de Dijon’) ([1980] OJ C256/2, see 11.3.3.1). To determine whether such acts are legally binding, it is necessary to ascertain whether the act intended to have legal effects of its own (ie whether the act lays down specific, new obligations and is not a mere reformulation or clarification of the law), and this can be established by examining the content and wording of the communication (see Case C-57/95 France v Commission [1997] ECR I-1640 and Case C-325/91 France v Commission [1993] ECR I-3303); • green papers which are aimed at stimulating discussion amongst stakeholders at European level. Such papers may lead to legislative developments outlined in white papers which contain proposals for EU action in a specific area; • staff working documents (SWD), which give a description, though non-exhaustive, of EU existing or proposed legislation and serve as guidance (see eg Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on the implementation of the circular economy package: options to address the

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•

interface between chemical, product and waste legislation (COM(2018) 32 final of 16 January 2018); action programmes used by the Commission to agree on long-term objectives of the EU (eg, the 7th General Union Environment Action Programme to 2020, ‘Living well, within the limits of our planet’ (Decision 1386/2013/EU, [2013] OJ L354/171)).

4.4 Case law of the Court of Justice of the European Union Some of the most significant developments in EU law have come from the decisions of the CJEU (see Chapter 8), which have established fundamental doctrines (eg principle of direct effect (see 6.3), principle of supremacy (see 6.2)) securing the authority of EU law (eg principle of Member State liability (see 7.3)). This derives partly from the Court’s power to ensure observance of Treaty objectives through Article 267 TFEU on preliminary references (see Chapter 9), partly from its creativity in comparison to the relative inertia of the legislative bodies, and partly from its role of filling the gaps left by the Treaties and EU acts. There is a fierce debate among academics as to whether the activities of the CJEU are legitimate, or whether the judges have trespassed on the sovereignty of Member States (idea of judicial activism) (see 8.6).

4.5 General principles of EU law Article 19(1) TEU provides: [The CJEU] shall ensure that in the interpretation and application of the Treaties the law is observed. The phrase ‘law is observed’ is interpreted so as to take into account not only EU law, but also any rule of law relating to the application and interpretation of treaties more generally. This means that other sources of (international) law, such as general principles of law, may assist in understanding the meaning of the provisions enshrined in the Treaties. There are two types of general principles of EU law: (a) principles that have been derived from the legal traditions of the Member States; and (b) principles that have been established by the CJEU. General principles can be used in order to clarify the intention behind legislation, as well as to test the validity of acts of the institutions. They are, however, not set in stone as they are derived from national law which also develops in its own way and/or established by the CJEU in light of the evolution of the EU legal system. On occasion a general principle is formally incorporated into the Treaties (eg the principle of equality in Article 2 TEU, the principle of proportionality in Article 5(1) TEU (see 3.4.2), the principle of subsidiarity in Article 5(1) TEU (see 3.4.1)). Other examples of general principles of EU law are the concept of legal certainty (see 5.2.2) (Case 70/83 Kloppenburg v Finanzamt Leer [1984] ECR 1075) or of institutional balance (see 5.2.1). It must be noted that prior to the Charter of Fundamental Rights of the European Union (see further 4.6 below), human rights were secured in the EU under the general

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principles of EU law (Case 29/69 Stauder v City of Ulm, Sozialamt [1969] ECR 419, 425). Whilst this illustrates the potential of general principles to be formally adopted into codified law, it should be noted that Article 6(3) TEU still recognises that fundamental rights that result from the constitutional traditions common to the Member States shall constitute general principles of the Union’s law.

4.6 Fundamental rights: the Charter of Fundamental Rights of the European Union and the European Convention on Human Rights The original treaties of the European Communities made no reference to respect for human rights. However, as explained in 4.5, the CJEU recognised the need to respect fundamental rights as an integral part of the general principles of EU law. The Treaties now acknowledge the importance of the protection and promotion of human rights. In its current version, Article 2 TEU states: 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 women and men prevail. As the Court explained, EU law is based on the premise that each Member State shares these values with the other Member States, and so each Member State can trust these values to be recognised and EU law that implements them to be respected (Case C-284/ 16 Slovakia v Achmea BV EU:C:2018:158, para 34; see also Case C-619/18 Commission v Poland EU:C:2019:531, paras 42–43).

4.6.1 Charter of Fundamental Rights of the European Union In reflection of the development of jurisprudence in the field of human rights, the Charter of Fundamental Rights of the European Union was signed on 7 December 2000, but it was not legally binding at the time. The Charter was amended on 12 December 2007 and formally adopted by the Member States under the Treaty of Lisbon 2007; it is now, in pursuance of Article 6(1) TEU (and Declaration No 1 concerning the Charter of Fundamental Rights of the European Union [2012] OJ C326/339), considered to be a primary source of EU law in the same way as the Treaties: The Union recognises the rights, freedoms and principles set out in the Charter of Fundamental Rights of the European Union of 7 December 2000, as adapted at Strasbourg, on 12 December 2007, which shall have the same legal value as the Treaties. (Article 6(1) TEU) The Charter binds EU institutions, as well as Member States, when the latter implement EU law (Article 51 of the Charter and Joined Cases C-411/10 and C-493/10 NS v Secretary of State for the Home Department and ME and Others v Refugee Applications Commissioner and Minister for Justice, Equality and Law Reform [2011] ECR I-13905, para 119). The Court has specified a number of requirements that should be examined to establish whether national legislation ‘involves the implementation of EU law for the purposes of Article 51 of the Charter’ (Case C-206/13 Cruciano Siragusa v Regione Sicilia EU:C:2014:126, para 25). As a result, when asked to give a preliminary ruling on the compatibility of a specific act with Charter rights, the CJEU has refused to

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answer such questions when the situations in which the rights were raised were not governed by EU law (eg Order of the Court, Case C-451/14 Petrus v Bulgaria EU:C:2015:71). The Charter does not create rights that are of general application in domestic law and applies only within the remit of EU law as specified by Declaration No 1: The Charter does not extend the field of application of Union law beyond the powers of the Union or establish any new power or task for the Union, or modify powers and tasks as defined by the Treaties. Further, under Protocol No 30, the UK and Poland sought reassurance that the Charter does not create additional rights for individuals in their States. Whilst Protocol No 30 is sometimes viewed as an ‘opt out’, the CJEU has in Joined Cases C-411/10 and C-493/10 (above) explained in clear terms that Article 1(1) of Protocol (No 30) explains Article 51 of the Charter with regard to the scope thereof and does not intend to exempt the Republic of Poland or the United Kingdom from the obligation to comply with the provisions of the Charter or to prevent a court of one of those Member States from ensuring compliance with those provisions. (para 120) Yet the CJEU has also stressed that [i]n addition, according to the sixth recital in the preamble to that protocol, the Charter reaffirms the rights, freedoms and principles recognised in the Union and makes those rights more visible, but does not create new rights or principles. (para 119) The Charter includes civil, political, economic, social and societal rights that stem from a variety of European and national sources. According to Article 52(3) of the Charter, the meaning and scope of the rights contained in it shall be the same as those laid down by the European Convention on Human Rights. This also means that the case law of the European Court of Human Rights must be taken into account for the purpose of interpreting the Charter provisions (Case C-562/13 Centre public d’action sociale d’Ottignies-Louvain-la-Neuve v Moussa Abdida EU:C:2014:2453, para 47). Yet, the Charter includes further rights such as freedom to conduct a business, integration of persons with disabilities, fair and just working conditions, etc. There are two ways to determine whether a Charter right can be invoked before a court in conjunction with an EU act: either the right is mandatory as a general principle of EU law (Case C-414/19 Egenberger EU:C:2018:257, para 76) or it is ‘both mandatory and unconditional in nature’ (Joined Cases C-569/16 and C-570/16 Stadt Wuppertal v Bauer and Willmeroth v Broßonn EU:C:2018:871, para 85; Egenberger, para 76). Article 21, which enshrines the prohibition of all discrimination on grounds of religion or belief, is an example of the former (Egenberger, para 76; Case C-193/17 Cresco Investigation GmbH v Achatzi EU:C:2019:43, para 76), whereas Article 31(2) on the right to rest periods and periods of paid leave is an example of the latter (Bauer and Willmeroth, para 86). In contrast, Article 27 on workers’ right to information and consultation within the undertaking cannot be invoked as such because ‘to be fully effective, it must be given more specific expression in European Union or national law’ (Case C-176/12 Association de médiation sociale EU:C:2014:2, para 45) Accordingly, States must ensure that their laws are interpreted as far as possible in conformity with the Charter rights (Bauer and Willmeroth, para 91). If this is not possible, then the national court must disapply national legislation (Bauer and

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Willmeroth, paras 86 and 91; Egenberger, para 79). Failing that, an individual can use State liability (see 7.3) to obtain appropriate compensation for the loss sustained. The fact that the Charter binds Member States when implementing EU law has inevitably led to a discussion of whether the Charter’s rights can be invoked not only against Member States but also against individuals. The Court in Bauer and Willmeroth asserts that the provisions of the Charter can be invoked in relation to directives in both public and private disputes (para 87).

4.6.2 European Convention on Human Rights Article 6(3) TEU provides: 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 repeats similar wording used by the ECJ in Case C-260/89 ERT [1991] ECR 2925, para 41. The TEU thus formally acknowledges that the ECHR forms part of the EU’s fundamental principles when EU law is being interpreted and applied. However, the Luxembourg Court has ‘no power to examine the compatibility with the European Convention on Human Rights of national legislation lying outside the scope of [Union] law’ (Case 12/86 Demirel v Stadt Schwäbisch Gmünd [1987] ECR 3719, para 28). Article 6(2) TEU provides that the EU shall accede to the ECHR, which means that the ECHR will be directly applicable to the EU and that the EU will be required by virtue of international law to abide by its provisions. In other words, judgments of the CJEU could be challenged before the European Court of Human Rights. The accession negotiations started in May 2010 and a Draft Accession Agreement of the European Union to the European Convention on Human Rights ( ) was finalised on 5 April 2013. Yet on 18 December 2014 the CJEU in Opinion 2/13 EU:C:2014:2454 declared this agreement to be incompatible with EU law, mainly on the basis that it would disregard the intrinsic nature of the European Union and affect the division of powers between the EU and its Member States. In October 2015 the Commission was invited by the Council to identify options to address the issues raised by the Opinion. In its 2017 work programme, the Commission declared that it was continuing its work on accession (COM(2016) 710 final, at 12) but such an endeavour does not appear in its 2018 (COM(2017) 650 final), 2019 (COM(2018) 800 final) and 2020 (COM(2020) 37 final) work programmes.

4.7 International agreements Lastly, we should consider international law as part of the corpus of the acquis. The EU has legal personality under Article 47 TEU, and Article 216 TFEU provides that agreements entered into with third countries are to be binding on both the EU and the Member States. This includes multilateral and bilateral treaties to which the EU is a party. For example, the EU is a party to the World Trade Organization (WTO) Agreement and the United Nations Convention on the International Sale of Goods. Many such international agreements are the result of the external common trade policy regime.

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The ECJ held, in Joined Cases 21–24/72 International Fruit Company NV and Others v Produktschap voor Groenten en Fruit [1972] ECR 1219 that the General Agreement on Tariffs and Trade (GATT) 1947 was binding on the EU; and in Case 70/ 87 Fédération de l’industrie de l’huilerie de la CEE (Fediol) v Commission [1989] ECR 1781 and Case C-69/89 Nakajima v Council [1991] ECR I-2069 the Court held that companies could, in specific circumstances, challenge the legality of an EU measure in light of GATT 1947, and now in respect of the WTO Agreement. More recently, the EU has also become a party to human rights treaties (whenever this is allowed by the treaty) such as the Convention on the Rights of Persons with Disabilities.

4.8 Further reading Bergström CF, ‘The Distinction between Legislative and Non-legislative Acts’ in Bergström CF and Ritleng D (eds), Rulemaking by the European Commission. The New System for Delegation of Powers (OUP, 2016) 1. Cartabia M, ‘Fundamental Rights and the Relationship among the Court of Justice, the National Supreme Courts and the Strasbourg Court’ in Court of Justice of the European Union, 50th Anniversary of the Judgment in Van Gend en Loos 1963–2013, Conference Proceedings, 13 May 2013 (OPUE, Luxembourg, 2013) 155. Craig P, ‘Delegated Acts, Implementing Acts and the New Comitology Regulation’ (2011) 36 EL Rev 671. Driessen B, ‘Delegated Legislation after the Treaty of Lisbon: An Analysis of Article 290 TFEU’ (2010) 35 EL Rev 837. Gragl P, ‘A Giant Leap for European Human Rights? The Final Agreement on the European Union’s Accession to the European Convention on Human Rights’ (2014) CML Rev 13. Harpaz G, ‘The European Court of Justice and its Relations with the European Court of Human Rights: The Quest for Enhanced Reliance, Coherence and Legitimacy’ (2009) 46 CML Rev 105. Hoffman H, ‘Legislation, Delegation and Implementation under the Treaty of Lisbon: Typology Meets Reality’ (2009) 15(4) European Law Journal 482. Král R, ‘On the Practice of Amending or Supplementing EU Directives by EU Delegated Regulations’ (2020) 43(5) EL Rev 409. Lenaerts K and Gutiérrez-Fons JA, ‘The Role of General Principles of EU Law’ in A Arnull et al (eds), A Constitutional Order of States? Essays in EU Law in Honour of Alan Dashwood (Hart Publishing, 2011) 179. Popescu R, ‘Features of the Unwritten Sources of European Union Law’ (2013) XX Lex ET Scientia International Journal 98. Weiss W, ‘Human Rights in the EU: Rethinking the Role of the European Convention on Human Rights after Lisbon’ (2011) 7 European Constitutional Law Review 64.

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Summary

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European Union law comprises a variety of sources that may be classified as (i) primary sources (TEU and TFEU) and (ii) secondary sources (Article 288 TFEU) which include legally binding EU acts, such as regulations, directives and decisions, and soft law, such as recommendations and opinions. The EU makes use of a variety of legal instruments outside Article 288 TFEU. The CJEU also plays an important role in the creation and development of EU law through its case law and use of general principles of (EU) law.

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What is the role of general principles of law in the creation of EU law? What is meant by the legal basis of an EU act, and why is it important? What are the key differences between regulations and directives? How are human rights protected in the European Union?

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The Law-making Process in the European Union

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The Law-making Process in the European Union

After reading this chapter, you will be able to understand: • the principles of law-making • the difference between the various legislative procedures • the difference between the legislative and non-legislative procedures.

5.1 Introduction The principle of representative democracy (see 2.2) has been reinforced by extending the application of the ordinary legislative procedure, whereby the Council and the European Parliament legislate together in a range of areas of EU policies. Moreover, this procedure involves national parliaments, thereby proving that the EU is based on the concept of representative democracy. Fundamentally, EU law distinguishes between legislative and non-legislative acts, a distinction based on the procedure used to pass an act. To qualify as a legislative act, an act must have been adopted following a legislative procedure according to Article 289(3) TFEU. This means that acts that are not passed using a legislative procedure are not legislative acts. The importance of the procedure used is further stressed by the CJEU. As the General Court explained in Inuit (Case T-18/10 Inuit Tapiriit Kanatami v European Parliament and Council [2011] ECR II-5599, para 65, as upheld by the Court of Justice in Case C-583/11P Inuit Tapiriit Kanatami v European Parliament and Council EU:C:2013:625, para 61), the distinction between legislative and regulatory acts is based solely on the procedure used to pass the particular act (see further 10.2). In the law-making process the EU institutions are guided by a number of key principles, discussed at 5.2 below. There are two legislative procedures: the ordinary legislative procedure (5.3.1), and the special legislative procedure (5.3.2). Further the Commission can enact other EU acts using its delegated and implementing powers, examined at 5.4.

5.2 The principles of law-making In the law-making procedure, a number of principles must be complied with. Whilst some relate to the institutions, others concern the content and the procedure itself.

5.2.1 Principles relating to the institutions One of the key principles of law-making is the principle of cooperation between all institutions involved in the law-making process. As this process involves three main institutions – the Commission, the Council and the European Parliament – it is known as a ‘trilogue’. As the Court put it:

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A trilogue is an informal tripartite meeting in which the representatives of the Parliament, the Council and the Commission take part. The aim of such exchanges is to reach a prompt agreement on a set of amendments acceptable to the Parliament and the Council, which must subsequently be approved by those institutions in accordance with their respective internal procedures. The legislative discussions conducted during a trilogue may concern both political and technical legal issues. (Case T-540/15 De Capitani v European Parliament EU:T:2018:167, para 68) Trilogues are now recognised as an “‘established practice by which most EU legislation is adopted’ and are therefore regarded … as ‘decisive phases of the legislative process’” (De Capitani, para 70, citing Parliament resolution of 28 April 2016 on public access to documents, paras 22 and 26). According to the European Parliament, between 70–80% of legislative acts are adopted via trilogues (De Capitani, para 70 citing Parliament resolution). They undoubtedly form part of the legislative process. In order to organise and facilitate cooperation between these institutions, as well as to improve the efficiency of the procedure and ensure that there is a constant discussion between the institutions, they have integrated the informal ‘trilogue’ into their rules of procedure. For example, Chapter 3, Section 3 of the Rules of Procedure of the European Parliament entitled ‘Interinstitutional negotiations during the ordinary legislative procedure’ explains in detail how the trilogue works from the Parliament’s perspective (European Parliament 2019–2024, Rules of Procedure, 9th parliamentary term, February 2020). Further, the institutions have adopted a number of agreements. In particular, Article 295 TFEU recognises their capacity to conclude legally binding interinstitutional agreements: The European Parliament, the Council and the Commission shall consult each other and by common agreement make arrangements for their cooperation. To that end, they may, in compliance with the Treaties, conclude interinstitutional agreements which may be of a binding nature. The key agreements with regard to the law-making process are the Interinstitutional Agreement on Better Law-Making ([2016] OJ L123/1), the Joint Declaration on Practical Arrangements for the Co-Decision Procedure ([2007] OJ C145/5), the Framework Agreement on Relations between the European Parliament and the European Commission ([2010] OJ L304/47 – latest amendment in [2018] OJ L45/46) and the Interinstitutional Agreement on Budgetary Discipline, on Cooperation in Budgetary Matters and on Sound Financial Management ([2013] OJ C373/1). The thrust of these instruments is that these institutions will consult each other before a legislative act is drafted and throughout the law-making process. The trilogue has, however, been criticised for its lack of transparency (see further 5.2.2). Following a strategic inquiry, the European Ombudsman (see 2.3.3) recommended that a number of documents and information be made publicly available (Case OI/8/2015/JAS, Decision of the European Ombudsman setting out proposals following her strategic inquiry OI/8/2015/JAS concerning the transparency of Trilogues, 12 July 2016). The CJEU in De Capitani also stressed the importance of providing access to trilogue documents, though upon request, unless the decisionmaking process were to be undermined ‘specifically and actually’ by making these documents public and the likelihood of the process being undermined is ‘reasonably foreseeable and not purely hypothetical’ (paras 63 and 85).

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A second significant principle is the principle of institutional balance. This may be defined in the following terms (see Article 13(2) TEU): • each institution must act within its powers defined by the Treaties (ie no extension or transfer of powers) (Case C-409/13 Council v Commission (Macro-Financial Assistance) EU:C:2015:217, para 75) and in accordance with the procedures, conditions and objectives set out in the relevant Treaty provisions (Case C-687/15 Commission v Council EU:C:2017:803, para 40); • each institution must exercise its powers with due regard for the powers of the other institutions (principle of mutual and sincere cooperation between EU institutions) (see Macro-Financial Assistance, para 65); • each institution plays a role in the law-making procedures of the EU. For example, the European Council cannot change the voting rule of the Council (Joined Cases C-643/15 and C-647/15 Slovak Republic and Hungary v Council EU:C:2017:631, para 148) as ‘the Treaties alone may, in particular cases, empower an institution to amend a decision-making procedure established by the Treaties’ (para 149). Further, the Court has explained that the fact that institutions are obliged to cooperate does not mean that their powers can be modified: ‘such cooperation cannot undermine one EU institution’s capacity to exercise its powers to the benefit of another institution’ (Case C-5/16 Poland v European Parliament and Council EU:C:2018:843, para 90). That being said, it must be borne in mind that interinstitutional rivalry also exists, as each institution wishes to guard its areas of competence. The principle of institutional balance (see 2.2.2) is safeguarded by the Court of Justice (see Case 138/ 79 SA Roquette Frères v Council [1980] ECR 3333) in the sense that the Court will declare invalid an act that has been adopted in breach of this principle.

5.2.2 Principles relating to content and procedure In relation to content and procedure, the main principles are: (a) the principles of subsidiarity and proportionality (see 3.4); (b) the principle of legal certainty: [Union] legislation must be certain and its application foreseeable by individuals. The principle of legal certainty requires that every measure of the institutions having legal effects must be clear and precise and must be brought to the notice of the person concerned in such a way that he can ascertain exactly the time at which the measure comes into being and starts to have legal effects. (Case T-115/94 Opel Austria GmbH v Council [1997] ECR II-39, para 124) (c) the principles of transparency (Articles 1 and 15 TEU) and publicity. Such principles are, according to the Court, ‘inherent to the EU legislative process’ (De Capitani (5.2.1 above), para 81). These are achieved by: (i) ensuring the broadest possible access to documents of all EU institutions (see also Article 42 of the Charter of Fundamental Rights). As the Court explains, citizens should have access to documents ‘drawn up with a view to the potential adoption of legislative initiatives by the Commission’ (Case C57/16 P ClientEarth v Commission EU:C:2018:660, para 95); (ii) requiring the European Parliament to meet in public, and the Council to open its deliberations and votes on draft legislative acts to the public (Article 15(2) TFEU). More importantly, as the Court of Justice explained:

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[This openness] enables citizens to participate more closely in the decisionmaking process and guarantees that the administration enjoys greater legitimacy and is more effective and more accountable to the citizen in a democratic system. … Openness … contributes to strengthening democracy by allowing citizens to scrutinize all the information which has formed the basis of a legislative act. The possibility for citizens to find out the considerations underpinning legislative action is a precondition for the effective exercise of their democratic rights. (Joined Cases C-39/05 P and C-52/05 P Sweden and Turco v Council [2008] ECR I-4723, paras 45–46) Citizens must be able to follow the legislative process and contribute to it. In this regard, access to all relevant information is of paramount importance. As a result of increased transparency, the principle of democratic legitimacy and the principle of accountability are more likely to be fulfilled. Furthermore, an open debate in which various views are expressed also boosts EU citizens’ confidence in the institutions (ClientEarth, paras 75 and 104; De Capitani, para 78). (d) The principles of simplicity, clarity and consistency in the drafting of the acts (Interinstitutional Agreement on Better Law-making ([2016] OJ L123/1) also enable the principle of transparency to be complied with.

5.3 The legislative procedures The Lisbon Treaty provides for two law-making procedures: (a) the ordinary legislative procedure; and (b) the special legislative procedure (see Figure 5.1).

Law-making procedures

Legislative procedures

Ordinary legislative procedure (Article 289 and 294 TFEU)

Consultation Procedure Consent Procedure

Special legislative procedures Non-legislative procedures

Budgetary procedure Others

Figure 5.1

Law-making procedures in the EU

By stipulating that the ordinary legislative procedure, which involves the European Parliament, is the standard procedure, the aim of the Treaty of Lisbon was to strengthen the democratic legitimacy of the EU by extending the European Parliament’s powers. It must be noted that a range of actors is involved in the law-making process, on both the national and the European levels.

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5.3.1 The ordinary legislative procedure The ordinary legislative procedure is explained in Article 289(1) TFEU and defined in Article 294 TFEU (see below): Article 289 1. The ordinary legislative procedure shall consist in the joint adoption by the European Parliament and the Council of a regulation, directive or decision on a proposal from the Commission. This procedure is defined in Article 294. The ordinary legislative procedure applies in 83 areas of law and policy, which means that most of the legislation in the Union is passed under this procedure. The noteworthy elements of the procedure are: • Two readings by the European Parliament, which gives that body a real opportunity to take part in the legislative process. • A positive action being required for amendments and rejection of a proposal. • A constant trilogue between the Council, the European Parliament and the Commission at all stages of the procedure (see 5.2.1). The Court has explained that the commonly held view that the sole role of the Commission is to act as an honest broker whose aim is to reconcile the positions of the European Parliament and the Council (see Joint Declaration on Practical Arrangements for the Codecision Procedure (Article 251 of the EC Treaty) ([2007] OJ C 145/5), paras 13, 17 and 22) is incorrect: the Commission does play its own role in the legislative process (Macro-Financial Assistance, para 74). Whilst these practices have increased the efficiency of the procedure, they have also been criticised for lacking transparency and accountability. The procedure is as follows (Article 294 TFEU): Submission of proposal • The Commission submits a proposal to the Parliament and the Council. • The national parliaments are informed of the draft legislative act and can comment on whether they deem the act to comply with the principle of subsidiarity. First reading • The European Parliament adopts a position and communicates it to the Council. • If the Council approves the position it will adopt the act concerned. If it does not, it will submit its own proposal to the European Parliament. The Commission will also inform the European Parliament of its position. Second reading • If within three months the European Parliament approves the Council’s position or does not take a decision, the Council’s proposal is deemed to have been adopted. If the European Parliament rejects the position by an absolute majority, the act is deemed not to have been adopted. However, if the Parliament suggests amendments, the text will be returned to the Council and to the Commission for an opinion. • If the Council approves the amendments within three months by a qualified majority, the act is deemed to have been adopted. If the Council cannot agree upon the amendments, a Conciliation Committee will be formed.

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Conciliation procedure • The Committee, comprising an equal number of members of the Council and the European Parliament, is convened within six weeks. The Commission also takes part in the discussions. If no joint text can be agreed, or that is not possible within the six-week window, the text shall be deemed not to have been adopted. • If a joint text is approved within six weeks, both the Council and the European Parliament are given six weeks to approve the text. If they do not approve the joint text, the act is not adopted.

5.3.2 The special legislative procedure A special legislative procedure is provided for by the Treaties in the following cases: • An act is adopted by the European Parliament with the participation of the Council (Article 289(2) TFEU). • An act is adopted by the Council with the participation of the European Parliament (Article 289(2) TFEU). • An act is adopted on the initiative of a group of Members States or of the European Parliament, on a recommendation from the European Central Bank, or at the request of the Court of Justice or the European Investment Bank (Article 289(4) TFEU). There is no single place in the Treaty that specifies all areas that are to be governed using the special legislative procedure. Rather, there are a variety of provisions that refer to special legislative procedures. For example, in Case T-512/12 Front Populaire pour la libération de la saguia-el-hamra et du rio de oro (Front Polisario) v Council EU:T:2015:953, the Court explained that the procedure defined in Article 218(6)(a) TFEU satisfied the criteria of Article 289(2) TFEU and was thus to be considered a special legislative procedure (para 70). Under the Treaty of Lisbon, the special legislative procedure has replaced the consultation, budgetary and consent procedures. However, these procedures still apply in respect of specified areas in the Lisbon Treaty. In this regard, the TFEU refers to the following procedures: • Consultation. Under Article 289 TFEU, consultation is a special legislative procedure whereby the European Parliament (as well as the European Economic and Social Committee and the Committee of the Regions – see 2.6) is asked for its opinion on proposed legislation before the Council adopts it. However, there is no legal obligation upon the Council to amend the proposal in the light of the comments of the European Parliament. Nevertheless, failure to consult the European Parliament means that the act can be declared void by the Court of Justice (Case 138/79 Roquette Frères, 5.2.1 above), as consultation with the European Parliament is understood to be an ‘essential procedural requirement’ (see 10.2.2). Also, if the Council intends to amend the proposal substantially, it is required to consult the European Parliament again (Case C-65/90 European Parliament v Council [1992] ECR I-4593, para 16). On the other hand, the European Parliament should not unnecessarily delay giving its opinion (Case C65/93 European Parliament v Council [1995] ECR I-643). This procedure is applicable in a limited number of legislative areas, such as internal market exemptions and competition law. Consultation of the European Parliament is also required, as a non-legislative procedure, where international agreements are being adopted under the Common Foreign and Security Policy.

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Consent. The European Parliament is requested to give its consent, thereby endowing it with a right of veto. This usually applies to the ratification of certain agreements negotiated by the EU, or is applicable most notably in the cases of serious breach by a Member State of Article 2 TEU values on which the EU is founded (Article 7(1) and (2) TEU), or for the accession of new EU Member States (Article 49, first paragraph TEU) or as regards arrangements for withdrawal from the EU (Article 50(2) TEU) (see further 1.6). Furthermore, it is used when new legislation on combating discrimination is being adopted and when the subsidiary general legal basis is applied in line with Article 352 TFEU (see 3.2.3). Budgetary procedure. This complex procedure, under which the European Parliament and the Council establish the Union’s annual budget, is described in Article 314 TFEU. It is not proposed to examine this in further detail in this book. Other procedures under, for example, Article 7(4) and (5) TEU and Article 354 TFEU (suspension of certain rights resulting from Union membership), Article 49, second paragraph TEU (ratification of accession agreement by Member States) and Article 218 TFEU (international agreements).

5.4 The adoption of regulatory acts The Treaty, as well as case law, distinguishes between legislative and other, ie regulatory, acts (see 4.3). Prior to the Lisbon Treaty, non-legislative acts were adopted according to what used to be called the ‘comitology’ procedure. Under this procedure, the Commission would consult a supervisory committee, comprising national civil servants presided over by a non-voting Commission member, before adopting implementing measures. Such a mechanism, initially introduced to deal with the Common Agricultural Policy, was legitimised by the ECJ in Köster (Case 25/70 Einfuhr- und Vorratsstelle für Getreide und Futtermittel v Köster and Berodt & Co [1970] ECR 1161) and then subject to a number of Council decisions. As the mechanism lacked transparency, appeared complex and did not allow the European Parliament to exercise supervisory powers, a number of Council decisions attempted to remedy these problems, but only partially. As the Treaty of Lisbon introduced two types of non-legislative acts – delegated acts (Article 290 TFEU) and implementing acts (Article 291(2) TFEU) – it also spelled out specific procedures for their adoption. In the process it (partially) did away with the comitology procedure. The procedure to be followed for the adoption of delegated acts referred to in Article 290 TFEU is explained in the Annex ‘Common Understanding between the European Parliament, the Council and the Commission on Delegated Acts’ to the Interinstitutional Agreement on Better Law-Making ([2016] OJ L123/1). Delegated acts are for measures of general scope that add, insert, delete or modify non-essential elements of the legislative act. The Commission prepares a draft act and consults with experts from the relevant national authorities (which will later have to implement the act). It also transmits the delegated act to the European Parliament and the Council. The legislator (ie the institution(s) that has/have passed the act delegating powers to the Commission) has two months from the submission of the draft act either to revoke the delegation, or to express its objections to the act. If objections are expressed then the Commission cannot adopt the act. In that case it is free either to adopt a new draft act, or to amend the rejected draft act or to do nothing.

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Article 291(2) TFEU provides that the Commission (or the Council in special circumstances) may exercise implementing powers when the legislative act so provides and ‘[w]here uniform conditions for implementing legally binding Union acts are needed’. The rules and general principles of the mechanisms that control the Commission’s exercise of implementing power shall, according to Article 291(3) TFEU, be laid down by the European Parliament and the Council (see also Case C-183/ 16 P Tilly-SabcoSAS v Commission EU:C:2017:704, para 90). In 2011, the European Parliament and the Council adopted Regulation 182/2011 ([2011] OJ L55/13) to set out the way implementing acts are agreed upon. In fact, the mechanisms are reminiscent of the comitology procedures. According to the Regulation there are two procedures, the examination procedure and the consultative/advisory procedure, both using committees comprising representatives of Member States, scientific experts and representatives from business and industry, and presided over by a non-voting representative of the Commission. The committees act as a forum for discussion between the Commission and the national authorities. Under the examination procedure, the Commission can adopt an implementing act only if the relevant committee positively agrees to it. Under the consultative procedure, the Commission may adopt an implementing act despite a negative opinion expressed by the relevant committee. That being said, an appeal committee set up after the adoption of the act may, by delivering a negative opinion, repeal the act. Whilst the new system works well overall, the Commission has on a number of occasions been put in a situation where, as a result of a ‘no opinion’ vote (ie no qualified majority for or against) in the Appeal Committee, it had to take a decision without clear political backing from Member States and in areas that are politically sensitive and directly affect EU citizens and businesses (eg on GMOs). As a consequence, President Juncker called in its State of the Union address in 2016 for the comitology procedure to be reformed, arguing that such rules cannot be deemed democratic. Draft legislation to this effect has been proposed by the Commission in February 2017 (COM(2017) 85 final) but has, as of 1 May 2020, not been adopted.

5.5 Further reading Bergström CF and Ritleng D (eds), Rulemaking by the European Commission. The New System for Delegation of Powers (OUP, 2016). Blom-Hansen K and Brandsma GJ, ‘The EU Comitology System: Intergovernmental Bargaining and Deliberative Supranationalism?’ (2009) 47 Journal of Common Market Studies 719. Christiansen T, ‘The European Union after the Lisbon Treaty: An Elusive “Institutional Balance”?’ in Biondi A et al (eds), EU Law after Lisbon (OUP, 2012) 228. Corbett R, ‘The Evolving Roles of the European Parliament and of National Parliaments’ in Biondi A et al (eds), EU Law after Lisbon (OUP, 2012) 248. Craig P, ‘The Treaty of Lisbon, Process, Architecture and Substance’ (2008) 33 EL Rev 137. Craig P, ‘Delegated Acts, Implementing Acts and the New Comitology Regulation’ (2011) 36 EL Rev 671. Devuyst Y, ‘The European Union’s Institutional Balance after the Treaty of Lisbon: “Community Method” and “Democratic Deficit” Reassessed’ (2008) 39 Georgetown Journal of International Law 247.

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Driessen B, ‘Interinstitutional Conventions and Institutional Balance’ (2008) 33 EL Rev 550. Kardasheva R, ‘The Power to Delay: The European Parliament’s Influence in the Consultation Procedure’ (2009) 47 Journal of Common Market Studies 385. Kliver P, ‘Reflections on the Lisbon Judgment – How the Judges at Karlsruhe Trust neither the European Parliament nor their National Parliament’ (2009) 16 Maastricht Journal of European and Comparative Law 263. Král R, ‘On the Practice of Amending or Supplementing EU Directives by EU Delegated Regulations’ (2020) 43 EL Rev 409. Pechtold A and Sneller J, ‘Democratic Control of the European Union’ (2007-2008) 24 Merkourios-Utrecht Journal of International and European Law 48. Sieberson SC, ‘The Treaty of Lisbon and its Impact on the European Union’s Democratic Deficit’ (2007-2008) 14 Columbia Journal of European Law 445. Special Issue of Journal of European Public Policy (2003) 20(7) on Twenty Years of Legislative Codecision in the European Union. Stie AE, Democratic Decision-making in the EU: Technocracy in Disguise? (Routledge, 2013) Türk A, ‘Lawmaking after Lisbon’ in A Biondi et al (eds), EU Law after Lisbon (OUP, 2012) 62. Summary

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• The law-making procedure is based on principles that relate to the institutions (cooperation between institutions and institutional balance), and to content and procedure. • The ordinary legislative procedure is the usual law-making procedure by default. According to this procedure, the Council and the European Parliament are on an equal footing, with the result that no act can be adopted without both bodies’ agreement.

Test Your Knowledge

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Do you agree that in the EU, the concept of ‘institutional balance’ is more appropriate than the notion of ‘separation of powers’ to explain the sharing and division of functions between the institutions? It is argued that Member States have little influence on the EU law-making process and are being subjected to rules to which they have not consented. To which extent does this statement reflect the reality? Your Spanish friend Miguel has been working for the Spanish armed forces for the past two years. Miguel has passed all the required fitness tests set by the Spanish armed forces, and there are no other requirements to work in the Spanish armed forces. However, he has recently heard that the European Commission is drafting an EU act (to be adopted under the ordinary legislative procedure) that would oblige all Member States to recruit members of the armed forces who are at least 1.70m tall, and that this would apply three years retroactively. If the EU act is passed, Miguel, who is 1.68m tall, would automatically be made redundant. Advise Miguel whether and at which stages of the ordinary legislative procedure he could influence the EU and national institutions.

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PART II

THE RELATIONSHIP BETWEEN EU LAW AND NATIONAL LAWS 6 The Constitutional Pillars of European Union Law 7 The Effectiveness of European Union law

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After reading this chapter, you will be able to understand: • • • •

the rationale of the principles of supremacy and direct effect of EU law the relationship between EU law and domestic law the difference between vertical and horizontal direct effect the application of the principle of direct effect to treaty provisions, EU acts and international agreements • the Court of Justice’s answer to limits on the principle of direct effect: indirect effect, incidental effect and application of the general principles of EU law.

6.1 Introduction The CJEU explains in Opinion 2/13 [Accession of the European Union to the European Convention for the Protection of Human Rights and Fundamental Freedoms] EU:C:2014:2454 that the founding treaties of the EU … have established a new legal order, possessing its own institutions, for the benefit of which the Member States thereof have limited their sovereign rights, in ever wider fields, and the subjects of which comprise not only those States but also their nationals … (para 157) As a result, ‘the Union possesses a constitutional framework that is unique to it’ (Opinion 1/17 [Comprehensive Economic and Trade Agreement between Canada and the European Union and its Member States] EU:C:2019:341, para 109), and EU law is characterised by the fact that it stems from an independent source of law, the Treaties, by its primacy over the laws of the Member States … and by the direct effect of a whole series of provisions which are applicable to their nationals and to the Member States themselves … (Opinion 2/13, para 166, emphasis added, see also Opinion 1/17, para 109). This means that the relationship between EU law and national law is governed by two principles: • the principle of supremacy, and • the principle of direct effect. The principle of supremacy (also called ‘principle of primacy’ or ‘principle of precedence’ (Case 106/77 Amministrazione delle Finanze v Simmenthal [1978] ECR 629, para 17; Case C-105/14 Criminal Proceedings against Taricco and Others EU:C:2015:555, para 52) denotes the superior hierarchical status of the Union legal order over the domestic legal orders. As a result, EU law has the capacity to override and pre-empt domestic law. Direct effect simply means that an EU norm can be invoked by an individual in, and applied by, a national court.

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6.2 Supremacy of EU law As the drafters of the Treaty of Rome had not considered the interrelationship between primary and secondary EC legislation on the one hand and constitutional and ordinary legislation in the national legal orders of the Member States, it was left to the CJEU to find a solution and it so created the principle of supremacy ‘which is an essential feature of the EU legal order’ (Case C-399/11 Melloni v Ministerio Fiscal EU:C:2013:107, para 59; Case C-516/17 Spiegel Online GmbH v Volker Beck EU:C:2019:625, para 19). As the concept developed through the jurisprudence of the CJEU and it provided national courts with instructions, national constitutional courts questioned the principle of supremacy.

6.2.1 Rationale for the principle of supremacy The original Treaty of Rome did not expressly state the supremacy of European Community (EC) law. As a result, it was envisaged that there would be occasions when national courts would have to apply EC laws. But this could cause difficulties if there was also a national law dealing with the same issue. Which law should the courts apply? When there are two conflicting laws, the normal rule is that under the lex posterior doctrine, the most recent law is applied. But that would not work in this context, as it would allow Member States to breach EC laws by subsequently passing conflicting legislation. The drafters had not addressed the matter in the original Treaty. Furthermore, both the dualist and monist systems (see 4.2) pose a threat to the unity of the Union legal order. Whilst the majority of States adopt a monist approach to international/EU law, elements from both systems are often found in EU Member States and so the distinction between the two approaches is not necessarily that neat. To give effect to the Treaties, dualist Member States must incorporate the EU treaties into the domestic legal order via a piece of legislation. For example, the European Communities Act 1972 provided for the incorporation of then EC law into the UK legal order. The problem is that later similar legislation could in fact repeal such an Act, thus nullifying the applicability of EU law in the UK. Another problem is that it has been argued by, for instance, the Danish Supreme Court that as an EU provision can only be valid under domestic law if it is incorporated in the Act of Accession, any EU subsequent provision (such as Article 6(3) TEU and thus general principles of EU law) cannot be directly applicable in the national legal order (Supreme Court of Denmark, Case 15/2014, DI, acting on behalf of Ajos A/S v Estate of A, 6 December 2016, at 46–47, translation available on the website of the Supreme Court of Denmark). In monist Member States which view national law and international law as components of the same legal system, duly ratified treaties are automatically incorporated into national law and given precedence over subsequent national laws but, often, not over constitutional law, which means that issues might arise when EU law clashes with national constitutional principles such as fundamental rights. It was feared that, if Member States could decide whether or not to give effect to EU law in their national legal order, this would lead to the fragmentation of EU law and jeopardise the proper functioning of the internal market.

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6.2.2 The creation and development of the principle of supremacy by the CJEU It was left to the Court of Justice to find a solution and establish the principle or doctrine of supremacy. In Case 6/64 Costa v ENEL [1964] ECR 585, Costa was trying to get out of paying his electricity bill by claiming that an Italian statute nationalising the electricity industry was contrary to EC law. The statute had been passed after Italy joined the EC, so on the normal time rule, it would prevail over EC law. But the Court of Justice ruled that EC law always prevails over national law, whichever law was passed first. The Court explained (at 593–94): By contrast with ordinary international treaties, the [EU] Treaty has created its own legal system which, on the entry into force of the Treaty, became an integral part of the legal systems of the Member States and which their courts are bound to apply. … The executive force of [EU] law cannot vary from one State to another in deference to subsequent domestic laws, without jeopardising the attainment of the objectives of the Treaty. … It follows from all these observations that the law stemming from the Treaty, an independent source of law, could not, because of its special and original nature, be overridden by domestic legal provisions, however framed, without being deprived of its character as [EU] law and without the legal basis of the [Union] itself being called into question. The Court went even further in Internationale Handellgesellschaft (Case 11/70 Internationale Handelsgesellschaft mbH v Einfuhr- und Vorratstelle für Getreide und Futtermittel [1970] ECR 1125), where it held that EC law would prevail not only over national laws but also over the constitutions of Member States, though in the given case it managed to interpret the EC law in question so that it did not conflict with the German Constitution. This position was reiterated in further cases: ‘Rules of national law, even of a constitutional order, cannot be allowed to undermine the unity and effectiveness of Union law’ (Case C-409/06 Winner Wetten GmbH v Bürgermeisterin der Stadt Bergheim EU:C:2010:503, para 61; Case C-273/15, ZS ‘Ezernieki’ v Lauku atbalsta dienests EU:C:2016:364, para 53). The bases for the principle of supremacy are the principle of effectiveness (Simmenthal II, paras 20–24; Ezernieki, para 53) or efficacy (Internationale Handelsgesellschaft, para 3) and the principle of uniformity (Internationale Handelsgesellschaft, para 3) or unity (Winner Wetten GmbH, para 61; Ezernieki, para 563) of EU law. Giving national courts the possibility to apply national law in contravention of EU law would undoubtedly be an ‘impediment to the full effectiveness of [Union] law [even if] only temporary’ (Simmenthal II, 6.1 above, para 23; Winner Wetten GmbH, para 57) and undermine the unity of EU law (Winner Wetten GmbH, para 61; Ezernieki, para 53).

6.2.3 Application of the principle of supremacy How national courts would apply the principle of supremacy in practice was originally unclear. Which tools should the national courts use to ensure the supremacy of EU law? The Court first explained that in case of conflicting provisions, EU law provisions would prevail, and so national law provisions would be disapplied (see Simmenthal II, 6.1 above). Then the Court spelled out the principle that national law must be interpreted in conformity with EU law (Case 14/83 Von Colson and Kamann v Land Nordrhein-Westfalen [1984] ECR 1891). Finally, the Court created the principle of State liability (Joined Cases C-6 and 9/90 Francovich and Others v Italy [1991] ECR I-

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5357, see 7.3). It is in this chronological order that they are discussed here. In Smith, the Court offered a new ‘Discourse of methods’ (‘Discours de la méthode’, see D Simon, Europe 2018, comm 352) which synthesises years of jurisprudence – ‘the Smith methodology’ (Case C-122/17 Smith v Meade and Others EU:C:2018:631). Though relating to directives invoked in dispute between private parties, this methodology is more widely applicable (except in cases of regulations and treaties as they are directly applicable (see 4.2 and 4.3.2)). The Court has explained that the national court must: (1) interpret national law in light of EU law in order to provide legal protection to individuals (paras 37–39); (2) if, however, such an interpretation proves impossible, the court must disapply national law (paras 40–41); and (3) if that is still not possible (such as in the case of reliance on a directive in private proceedings (para 43) or if the disapplication leads to a violation of fundamental rights (see Case C-42/17 MAS and MB EU:C:2017:936, para 59)), parties can rely on the principle of State liability in national courts (para 56) (see below and Figure 6.1). National courts interpret national law in light of EU law Such interpretation proves possible: national law interpreted in light of EU law

Such interpretation proves impossible: national courts must disapply national law

Disapplication possible: national law disapplied

Disapplication impossible: parties can rely on State liability in national courts

Figure 6.1 ‘The Smith methodology’

6.2.3.1

Principle of disapplication of national law Disapplication of national law is often viewed as the concomitant duty of national courts in complying with the principle of supremacy. Disapplication, however, does not mean that national law is deemed void or invalid as a matter of national or EU law (Joined Cases C-10-22/97 Ministero delle Finanze v IN.CO.GE.'90 Srl et al EU:C:1998:498, para 21; Case C-314/08 Filipiak v Dyrektor Izby Skarbowej w Poznaniu EU:C:2009:719, para 83). It might still be good law but not for situations governed by EU law. The body that is faced with national law contrary to EU law must refrain from applying national law; it must set aside national law in favour of EU legal provisions. It must be stressed that this duty to disapply national law is not owed by national courts only; all State organs, including administrative authorities and bodies, must set aside national law that is contrary to EU law (Case 103/88 Fratelli Costanzo v Milano [1989] ECR 1839, para 31; Minister for Justice and Equality, paras 38–39; Case C-174/ 16 H v Land Berlin EU:C:2017:637, para 70). In fact, in some cases there is no need for a ‘conscious’ disapplication of national law as the entry into force of some EU law

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provisions (such as that of the TFEU) renders automatically inapplicable conflicting provisions of national law (Taricco, 6.1 above, para 52). One of the problems faced by national courts was that in some instances national law restricted their power to rule a national law invalid. In Simmenthal II, an Italian judge was faced with a conflict between an EC regulation and Italian law. Under Italian law, only the Constitutional Court or the Parliament can declare a national law invalid. What should the court do – refer the case to the Constitutional Court or declare the law invalid itself? The ECJ held that every national court must apply EC law in its entirety and set aside any provision of national law that conflicts with it. The national court should not have to wait for a specific provision to be declared invalid or unconstitutional by a higher court (Simmenthal II, 6.1 above, para 24; Kücükdeveci, para 54). The Court’s position has remained unchanged as the case of Minister for Justice and Equality and Commissioner of An Garda Síochána v Workplace Relations Commission (Case C-378/17 EU:C:2018:979) shows: the primacy of EU law means that the national courts called upon, in the exercise of their jurisdiction, to apply provisions of EU law must be under a duty to give full effect to those provisions, if necessary refusing of their own motion to apply any conflicting provision of national law, and without requesting or awaiting the prior setting aside of that provision of national law by legislative or other constitutional means. (para 35) In the UK, a key development in relation to supremacy was Case C-213/89 R v Secretary of State for Transport, ex parte Factortame Ltd (Factortame (No 1)) [1990] ECR I-2433, which concerned the compatibility of the Merchant Shipping Act 1988 with the EC Treaty. Following a preliminary ruling (see Chapter 9), the national court found that [s]upremacy … was certainly well established in the jurisprudence of the ECJ long before the UK joined the Community. Thus, whatever limitation of its sovereignty Parliament accepted when it enacted the ECA 1972 it was entirely voluntary … [I]t has always been clear that it was the duty of a United Kingdom court … to override any rule of national law found to be in conflict with any directly enforceable rule of Community law. ([1991] 1 AC 603, per Lord Bridge at 658) As a result, the English courts were given the power to issue injunctions against the Crown and disapply an Act of Parliament that conflicted with EC law. In its latest and rather controversial jurisprudence, the Court seems to have set a condition for the use of disapplication. It has also specified that the principle of supremacy and its concomitant obligation to disapply do not apply to EU provisions that are not of direct effect (see further 6.3). In Case C-573/17 Popławski EU:C:2019:530, the Court stated that a national court’s obligation to disapply a provision of its national law which is contrary to a provision of EU law, if it stems from the primacy afforded to the latter provision, is nevertheless dependent on the direct effect of that provision in the dispute pending before that court. (para 68) According to the Court, to allow the principle of supremacy to apply irrespective of the nature of the legal provision would mean that the distinction between those that have direct effect and those that have not is blurred (Popławski, para 60). It remains to be seen whether the Court will reiterate its stance in further cases. It appears that the Court has also set limits to the disapplication obligation. In Taricco, it stated that national courts must ensure that, in disapplying national law, the

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fundamental rights of the individuals are not violated (6.1 above, para 53). For example, in MAS and MB which dealt with the principle that offences and penalties must be defined by law, the Court expressly referred to the principle of nonretroactivity (see 10.2.2.3) as well as to a wide body of legal provisions (of not only the Fundamental Charter of Human Rights but also the European Convention on Human Rights) and cases in the field of human rights (paras 52–55). If the disapplication leads to a violation of fundamental rights, ‘the national court is not obliged to disapply’ the domestic legal provisions (MAS and MB, para 59) ‘even if compliance with the obligation allowed a national situation incompatible with EU law to be remedied’ (para 61). It is particularly interesting to note that the Court then enjoins the legislator rather than the court to take the relevant measures, should a disapplication not be possible (para 61). 6.2.3.2

Principle that national law must be interpreted in light of EU law In 1984 the Court enunciated in von Colson (6.2.3 above) the principle that national law must be interpreted in light of EU law. Whilst this principle is often associated with the principle of indirect effect and thus deemed a palliative measure to the lack of horizontal direct effect of directives, it should be noted that von Colson predates the case of Marshall (Case 152/84 Marshall v Southampton and South-West Hampshire Area Health Authority [1986] ECR 723) in which the Court stated that directives do not have horizontal direct effect (see 6.3.5.1). Whilst initially the von Colson principle was only used in situations relating to directives, the Court applied it in a different context such as a framework decision under the previous third pillar (Case C-105/03 Pupino [2005] ECR I-5309, paras 34 and 43; Popławski, 6.2.3.1 above, para 72) and a general principle of EU law (Case C-555/07 Kücükdeveci v Swedex GmbH & Co KG [2010] ECR I-365, para 53). Therefore, the von Colson principle can be considered as another method, much like disapplication, to ensure the supremacy of EU law: ‘the primacy principle requires, inter alia, national courts to interpret, to the greatest extent possible, their national law in conformity with EU law’ (Popławski, para 57). In fact, in case of a conflict between a provision of EU law and one of national law, the preferred solution is to interpret national law in light of EU law: It should be stated at the outset that the question whether a national provision must be disapplied in as much as it conflicts with European Union law arises only if no compatible interpretation of that provision proves possible. (See Cases C-282/10 Dominguez v Centre informatique du Centre Ouest Atlantique and Préfet de la région Centre EU:C:2012:33, para 23; C-384/17 Dooel Uvoz-Izvoz Skopje Link Logistic N&N v Budapest Rendőrfőkapitánya EU:C:2018:810, para 61 and Joined Cases C-569/16 and C-570/16 Stadt Wuppertal v Bauer and Willmeroth v Broßonn EU:C:2018:871, para 65.) In other words, the principle of primacy and its concomitant obligation to disapply national law that is not in conformity with EU law are measures of last resort. The rationale for the principle of interpretation in conformity with EU law derives from the principle of sincere cooperation under Article 4(3) TEU (former Article 5 TEEC), whereby Member States are required to take any appropriate measure, general or particular, to ensure fulfilment of the obligations arising out of the Treaties or resulting from the acts of the institutions of the Union.

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The principle of sincere cooperation or loyal cooperation (as such or as enshrined in the relevant Treaty provision) has been expressly noted by the Court in a variety of cases (see eg von Colson, para 26; Pupino, para 42; Case C-723/17 Craeynest and Others v Brussels Hoofdstedelijk Gewest and Brussels Instituut voor Milieubeheer EU:C:2019:533, para 31). Undoubtedly, one of the States’ obligations under Article 4(3) TEU is to ensure that their national laws are in conformity with binding EU law. This actually explains why the Court has highlighted the ‘binding character’ of framework decisions in Pupino (para 33) and Popławski (para 72). The principle of effectiveness also obliges national courts to ensure that individuals can invoke the rights and obligations derived from EU law. As the Court explains, [t]he requirement for national law to be interpreted in conformity with Community law is inherent in the system of the Treaty, since it permits the national court, for the matters within its jurisdiction, to ensure the full effectiveness of Community law when it determines the dispute before it. (See Joined Cases C-397/01 to C-403/01 Pfeiffer et al v Deutsches Rotes Kreuz, Kreisverband Waldshut eV [2004] ECR I-8835, para 114 as repeated with slightly different wording in Dominguez, para 24 and Popławski, para 55.) The von Colson principle requires that ‘when [a national court] applies provisions of national law adopted either before or after a directive, [it must] interpret them as far as possible in the light of the wording and the purpose of that directive’ (Joined Cases C616/16 and C-617/16 Presidenza del Consiglio dei Ministri and Others v Pantuso and Others EU:C:2018:32, para 44); this obligation is also applicable in situations that do not deal with a directive (Popławski, para 23). The tricky element is the expression ‘as far as possible’ or, according to the latest case law, ‘to the greatest extent possible’ (Popławski, para 57; Joined Cases C-585/18, C-624/18 and C-625/18 AK v Krajowa Rada Sądownictwa and CP and DO v Sąd Najwyższy EU:C:2019:982, para 159). Which methods can national courts use to interpret national law in light of EU law and how far is the national court supposed to go? The means at the hands of national courts to interpret such difficult provisions must be ‘interpretative methods recognized by domestic law’ (Case C-268/06 Impact v Minister for Agriculture and Food and Others EU:C:2008:223, para 101). In other words, it is national legal methodology that must be used (principle of judicial autonomy). Yet, the Court has also suggested to national courts to adopt certain methodological rules of interpretation. For example, it has instructed courts ‘to do whatever lies within [their] jurisdiction, having regard to the whole body of rules of national law’ (Pfeiffer, para 118). This instruction is now part of the classic formula that requires ‘national courts to do whatever lies within their jurisdiction, taking the whole body of domestic law into consideration and applying the interpretative methods recognised by domestic law’ (Impact, para 101; see also Popławski, para 77). In some instances, the Court strongly hinted to the national courts which specific method they could use to interpret national law, though stressing it was their role to verify that such a method could be used (Case C-505/14 Klausner Holz Niedersachsen GmbH v Land Nordrhein-Westfalen EU:C:2015:742, paras 36–37; Popławski, para 108). With this, the Court aims to ensure that EU law is being given effectiveness and uniform application. Yet, the obligation to interpret national law in light of EU law has two limits (see Dominguez, para 25; Popławski, paras 74–76). First, it does not imply a duty of interpretation contra legem in the sense that the national courts are not required to provide an interpretation that is incompatible with the wording of the relevant piece of

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national legislation (Impact, para 100; Dansk Industri, para 32). It should be stressed that the source of law that cannot be interpreted contra legem is national legislation and not national jurisprudence (Dansk Industri, para 34). In such a situation, national case law must be changed (Case C-441/14 Dansk Industri (DI) v Estate of Karsten Eigil Rasmussen EU:C:2016:278, para 33). However, if it is impossible to interpret domestic law in conformity with a directive then national law should be disapplied (Kücükdeveci, para 51; Dansk Industri, para 35). This is to ensure that national courts provide ‘the legal protection which individuals derive from EU law’ and ‘ensure the full effectiveness of that law’ (Dansk Industri, para 35). As explained earlier, disapplication is a measure of last resort. Second, the interpretation that results from the application of the von Colson principle cannot go against the general principles of EU law (see 4.5), and more particularly the principles of legal certainty (see 5.2.2 and 10.2.2.3) and nonretroactivity (see 10.2.2.3) (Case 80/86 Criminal proceedings against Kolpinghuis Nijmegen BV [1987] ECR 3969, para 13; Case C-554/14 Ognyanov EU:C:2016:835, para 63; Popławski, para 75). The Court has spelled out that ‘the obligation for a national court to refer to EU law when interpreting and applying the relevant rules of domestic law is limited by general principles of law’ (Dansk Industri, para 32). For example, this type of interpretation cannot be used to increase penalties, as criminal law is subject to particularly strict rules of interpretation. In Kolpinghuis, the accused was prosecuted for filling bottles with tap water and selling it as mineral water. This was an offence only if Dutch law was interpreted in the light of the 1980 EC Directive on the exploitation and marketing of natural mineral waters, not yet implemented in the Netherlands. The Court held that it would be unfair to take an unimplemented directive into account, with the effect of determining or aggravating the criminal liability of an individual acting in contravention of the directive. In some instances, however, the Court does not expressly refer to the general principles. In Pretore di Salò, the Court does not mention the general principles of EU law (Case 14/86 Pretore di Salò [1987] ECR 2565, para 20) although it states that a directive cannot be used to ‘determin[e] or aggravat[e] the liability in criminal law of persons who act in contravention of that directive’ (para 13). Two reasons might be adduced for this lack of express mention of the general principles: either because it goes without saying that these principles are general principles, or because this obligation derives from the fact that a directive cannot impose obligations on an individual (see in particular Case C168/95 Criminal Proceedings against Arcaro [1996] ECR I-4705, para 37, see 6.3.3.2). For framework decisions, however, the Court refers to both the general principles of EU law and the lack of implementing measures (Pupino, para 45; Ognyanov paras 63– 64; Popławski, para 75). 6.2.3.3

Principle of State liability in relation to the principle of supremacy The third practical consequence of the application of the principle of supremacy is that the State can be held responsible for failing to comply with EU law under the concept of State liability (see 7.3). In Popławski the Court explained that the primacy principle requires, inter alia, national courts … to afford individuals the possibility of obtaining redress where their rights have been impaired by a breach of EU law attributable to a Member State. (6.2.3.1 above, para 56) State liability might be used because disapplication is not possible or if ‘the result prescribed by the directive cannot be achieved by way of interpretation’ and so

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‘[Union] law requires the Member States to make good damage caused to individuals through failure to transpose a directive, provided that three conditions are fulfilled’ (see Case C-91/92 Faccini Dori v Recreb Srl [1994] ECR I-3325, para 27).

6.2.4 The reaction of national constitutional courts to the principle of supremacy As explained above, certain States’ constitutions might be an impediment to such an automatic application of the principle of supremacy. The history of the relationship between the German Constitutional Court and the Court of Justice is particularly revealing in this regard. As the German Court explained, the principle of supremacy ‘only extends as far as the [Constitution] and the relevant Act of Approval permit or envisage the transfer of sovereign powers’ (OMT Programme, decision of 21 June 2016, BverfGE, 2 BvR 2728/13 et al, para 120). The national limits to supremacy have been expressed in three contexts: (a) The constitutions of both Germany and Italy, two original Members States, list fundamental rights. Given that the Union was essentially an economic union in its inception, it was thought that its legislation would never clash with such fundamental rights. Yet, increasingly, human rights issues were raised (first in Joined Cases 36, 37, 39 and 40/59 Nold and Others v High Authority [1960] ECR 423), and the Court had to concede that ‘fundamental human rights [were] enshrined in the general principles of Community law and protected by the Court’ (Case 29/69 Stauder v City of Ulm, Sozialamt [1969] ECR 419, para 7) and that such protection was ‘inspired by the constitutional principles common to the Member States’ (Case 11/70 Internationale Handelsgesellschaft mbH v Einfuhr- und Vorratsstelle für Getreide und Futtermittel [1970] ECR 1125, para 4). Despite the Court’s attempts to assuage national fears regarding the protection of fundamental rights, the German Constitutional Court in the famous ‘Solange I’ judgment (Solange I, decision of 29 May 1974, BVerfGE 37, 271, [1974] CMLR 540) rejected the full application of the principle of supremacy of EC law. It qualified it by explaining that so long as (hence ‘Solange’) the then EC lacked a codified catalogue of fundamental rights, it would disapply EC law that conflicted with the fundamental rights guaranteed in the German Constitution. Thus national limits were put on the supremacy of EC law, though such limits were relative, as they depended on the evolution and nature of EC law. Indeed, in a second famous ‘Solange II’ ruling (Solange II, decision of 22 October 1986, BVerfGE 73, 339, [1987] 3 CMLR 225) the German Constitutional Court inverted the ‘so long as’ condition: it promised not to question the supremacy of EC law so long as the latter guaranteed fundamental rights substantially similar to those recognised by the German Constitution. It is questionable whether this jurisprudence is still relevant bearing in mind that the EU and its institutions, as well as Member States when implementing EU law, are now bound by the Fundamental Charter. (b) The second constitutional battle is that over the ever-growing competences of the Union. A wide range of factors has contributed to this increase in the range and scope of competences of the European Union (eg judicial activism (see 8.6), use of the effet utile doctrine (see 8.5), use of the residual powers clause (see 3.2.3), etc). As a result, a growing number of areas are covered by EU legislation to which the principle of supremacy applies. The German Constitutional Court indicated in the

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famous Maastricht ruling that such ultra vires legislation would not be binding in the German legal order: Thus, if European institutions and agencies were to treat or develop the Union Treaty in a way that was no longer covered by the Treaty in the form that is the basis for the Act of Accession, the resultant legislative instruments would not be legally binding within the sphere of German sovereignty. (Maastricht, decision of 12 October 1993, BVerfGE 89, 155, [1994] 1 CMLR 57, para 99) The German Court reiterated its position in Lisbon (decision of 30 June 2009, BVerfGE 123, 267, [2010] 3 CMLR 276) but accepted in Honeywell (decision of 6 July 2010, 2 BvR 2661/06, [2011] 1 CMLR 1067) that the Union would generally act within the scope of its competences, and that only for clear and exceptional violations would the German Constitutional Court challenge the supremacy of EU law. It later specified that the EU institutions must have exceeded ‘their competences in a manifest and structurally significant way’ (OMT Programme, paras 115 and 121). (c) The third constitutional hurdle relates to what is often viewed as the very core of State sovereignty. In the Lisbon judgment (see (b) above), the German Constitutional Court identified a number of essential areas of democratic formative action, such as: decisions on substantive and formal criminal law; on the disposition of the monopoly on the use of force by the police within the state and by the military towards the exterior; fundamental fiscal decisions on public revenue and public expenditure, the latter being particularly motivated, inter alia, by social policy considerations; decisions on the shaping of living conditions in a social state; and decisions of particular cultural importance, for example on family law, the school and education system and on dealing with religious communities. ([2010] 3 CMLR 276, 341) As explained in OMT Programme (paras 121–135), the core justification for limits (b) and (c) is the sovereignty of the people and the principle of democracy as enshrined in the German Constitution. Yet, the Court has also stressed that its review of EU law ‘must be exercised cautiously and in a way that is open to European integration’ (OMT Programme, para 121). The German Constitutional Court has declared that if an EU measure violates these limits, German institutions that hold constitutional powers may, within their competences, be required to use legal or political means to work towards the repeal of these measures as well as take suitable national measures to restrict the national effects of these EU measures as far as possible (OMT Programme, para 170).

6.2.5 The principle of supremacy in EU legal instruments and documents The principle of supremacy is now firmly enshrined in EU law and fully recognised. Although not legally binding, Declaration No 17 Concerning Primacy ([2012] OJ C326/346) affirms 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.

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The Declaration cites the Opinion of the Council Legal Service of 22 June 2007 (11197/ 07 (JUR 260)): It results from the case-law of the Court of Justice that primacy of [EU] law is a cornerstone principle of [EU] law … According to the Court, this principle is inherent to the specific nature of the European [Union]. At the time of the first judgment of this established case law (Costa/ENEL 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.

6.3 Direct effect 6.3.1 The principle of direct effect Under international law, a State is obliged to abide by treaty provisions. If it does not, usually only the injured State can lodge a complaint against the State that has failed to comply with the treaty (see eg proceedings before the International Court of Justice). Some treaties, however (eg European Convention on Human Rights), provide for individuals to access an international court. The Treaty of Rome did not provide for any such mechanism. It nevertheless allowed the Commission to investigate allegations of non-compliance with the Treaty or other legislative acts enacted by the EU institutions. Having said that, the Commission might not take up the case, or might not pursue it through the courts, accepting the Member State’s excuses and promises of future obedience (see further 7.2). Even if it did, it might take two to three years before the Member State was held to be in breach and thus obliged to put its law right. In other words, the mechanism of remedies afforded in the original Treaty was not favourable to individuals. The ECJ, in the seminal Van Gend en Loos ruling (Case 26/62 NV Algemene Transport- en Expeditie Onderneming van Gend & Loos v Netherlands Inland Revenue Administration [1963] ECR 1, 12), confirmed the independence of the European legal order from classical international law: The objective of the [EU] Treaty, which is to establish a common market, the functioning of which is of direct concern to interested parties in the [Union], implies that this Treaty is more than an agreement which merely creates mutual obligations between the contracting States. According to the Court, (now) EU law is directly applicable in the national legal orders, and it is to be enforced by national courts.

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ca ple In Case 26/62 NV Algemene Transport- en Expeditie Onderneming van Gend & Loos v xam e Netherlands Inland Revenue Administration [1963] ECR 1, the company imported a chemical from Germany to The Netherlands; it was then told that the chemical had been reclassified so the customs duty payable had increased. This was clearly a breach of former Article 12 TEEC (now Article 30 TFEU), which forbade the imposition of new customs duties between Member States. Van Gend & Loos sued the Dutch authorities to get its money back. The case was referred to the ECJ for a preliminary ruling under former Article 177 TEEC (now Article 267 TFEU). The Advocate General (see 8.2) argued that the Treaty imposed obligations on Member States that were enforceable only through former Article 169 TEEC (now Article 258 TFEU) (see 7.2). But the Court went much further. It said that the then EEC constituted a ‘new legal order’ and that EEC law conferred rights on individuals

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that become part of their legal heritage. They could therefore enforce these rights directly before the national court; the rights had direct effect. The Court admitted that the reason it made this decision was to provide an additional way to force Member States to obey EEC law. Any individual could then claim rights under EEC law and the national court would enforce them, with a preliminary ruling if required (see Chapter 9). It was no longer necessary to wait for the Commission to take action. The Court held (at 152): [T]he [EU] 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 subjects of which comprise not only Member States but also their nationals. Independently of the legislation of the Member States, [EU] law therefore not only imposes obligations on individuals but is also intended to confer on them rights which become part of their legal heritage. These rights arise not only where they are expressly granted by the Treaty, but also by reason of obligations which the Treaty imposes in a clearly defined way upon individuals as well as upon Member States.

The Van Gend en Loos case set a two-pronged test for individuals claiming direct effect: (a) the specific EU provision must provide Member States and individuals with rights and obligations; and (b) such rights and obligations can be enforced in national courts. Indeed, the ECJ explained in the Francovich case (Joined Cases C-6 and 9/90 Francovich and Others v Italy [1991] ECR I-5357, para 12) that in order to determine whether a provision has direct effect, a court must be able to: • identify persons who are entitled to the right • ascertain the content of that right, and • identify the person or body that is liable to provide that right. Furthermore, the qualities required by a provision, spelled out in p 13 of the Van Gend en Loos decision, are as follows: (a) the provision must be clear; and (b) the provision must be unconditional. These two requirements have been formulated in different ways in the subsequent jurisprudence on direct effect such as ‘unconditional and sufficiently clear and precise’ (Case 9/70 Grad v Finanzamt Traunstein [1970] ECR 825, para 9; Marshall, para 46), ‘unconditional and sufficiently precise’ (Case 148/78 Criminal proceedings against Ratti [1979] ECR 1629, para 23) and ‘a precise obligation which does not require the adoption of any further measures on the part either of the Community institutions or of the Member States and which leaves them, in relation to its implementation, no discretionary power’ (Case 41/74 Van Duyn v Home Office [1974] ECR 1337, para 6). ‘Clear and precise’ means that the provision sets out an obligation or right ‘in unequivocal terms’ (Marshall, para 52; Joined Cases 246/94, C-247/94, C-248/94 and C-249/94 Cooperativa Agricola Zootecnica S Antonio and Others v Amministrazione delle Finanze dello Stato EU:C:1996:329, para 19) whilst ‘unconditional’ requires that the ‘obligation is not qualified by any condition, or subject, in its implementation or effects, to the taking of any measure either by the institutions of the [Union] or by the Member States’ (Case 28/67 Firma Molkerei-Zentrale Westfalen/Lippe GmbH v Hauptzollamt Paderborn [1968] ECR 144, 153).

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6.3.2 Direct effect of Treaty provisions In Van Gend en Loos (6.3.1 above), the ECJ explained that individuals could derive rights directly from the Treaty. In that case the Court VERTICAL: in principle all held only that an individual could assert his rights types of primary as spelled out in the Treaties against the State; but and secondary in Case 43/75 Defrenne v Sabena [1976] ECR 455, sources binding it went further. The applicant here complained the Member HORIZONTAL: in principle that her employer, an airline company, was State and all types of primary and paying female air stewardesses less than male granting rights secondary sources binding ones, contrary to former Article 119 TEEC (now to individuals individuals and granting Article 157 TFEU, which requires equal pay for Individual relying on rights, except directives equal work). The Court held that Treaty Individual rights under EU law provisions, such as that article, have direct effect against everyone: vertical effect, obliging the Figure 6.2 Vertical and horizontal effects of EU law State to act in conformity with the Treaty provisions; and horizontal effect, compelling individuals and companies to abide by the Treaty provisions (see Figure 6.2). Yet it cannot be assumed that all TEU or TFEU provisions have direct effect, for they still have to fulfil the direct effect test (6.3.1 above). In Sociaal Fonds voor de Diamantarbeiders (see 12.4.2) the Court stated that specific treaty provisions ‘directly confer[red] rights on individuals concerned’ because they ‘impose[d] precise and clearly-defined obligations on Member States which do not require any subsequent intervention by [Union] or national authorities for their implementation’ (Joined Cases 2 and 3/69 Sociaal Fonds voor de Diamantarbeiders v SA Brachfeld & Sons and Chougal Diamond Co EU:C:1969:30, paras 22, 23; see also Case 537/16 Garlsson Real Estate SA and Others EU:C:2018:193, para 65). The provisions of the Charter of Fundamental Rights, which is a treaty and thus considered a primary source of EU law, can also have direct effect if they fulfil the required conditions (see Garlsson and Others, paras 65–67). For example, Article 50 has been recognised as having direct effect (Garlsson and Others, paras 65–67). State

6.3.3 Direct effect of EU acts The Court of Justice has expanded the doctrine of direct effect to EU acts, namely, to regulations, directives and decisions, as well as to international agreements. Nonbinding measures, such as recommendations and opinions, do not have direct effect. Given that it is not possible to give horizontal direct effect to directives (ie effect as between individuals) (see 6.3.3.2 below), the Court has applied a variety of techniques to ensure that individuals are still able to enforce the rights they have been guaranteed by EU law. 6.3.3.1

Direct effect of regulations After establishing the direct effect of Treaty provisions, the Court pushed the concept further by looking at regulations. According to Article 288(2) TFEU, regulations are directly applicable, that is, they do not need any implementation measure to be considered valid law at national level (see 4.3.2.1). The Court therefore had no problem extending direct effect to regulations, because the Treaty already made them directly applicable, in other words they are directly incorporated into the law of Member States. If they are unconditional, clear and precise, there is no problem giving regulations

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vertical (Grad, para 5) and horizontal (Case 34/73 Fratelli Variola v Amministrazione delle Finanze [1973] ECR 981) direct effect, so they can be enforced against both the Member State and private individuals. That being said, it must be noted that it is not the entire regulation that has direct effect but the specific provision that fulfils the test (Case C-403/98 Azienda Monte Arcosu Srl v Regione Autonoma della Sardegna, Organismo Comprensoriale no 24 della Sardegna and Ente Regionale per l’Assistenza Tecnica in Agricoltura (ERSAT) [2001] ECR I-103): [A]lthough, by virtue of the very nature of regulations and of their function in the system of sources of [EU] law, the provisions of those regulations generally have immediate effect in the national legal systems without its being necessary for the national authorities to adopt measures of application, some of their provisions may none the less necessitate, for their implementation, the adoption of measures of application by the Member States. … In the light of the discretion enjoyed by the Member States in respect of the implementation of those provisions, it cannot be held that individuals may derive rights from those provisions in the absence of measures of application adopted by the Member States. (paras 26 and 28) In such an instance, the provision is not unconditional, thereby failing to fulfil the van Gend en Loos test (6.3.1 above), and so cannot be relied on. At this juncture, it must be highlighted that whereas direct applicability denotes the way an EU act becomes national law without any need for national implementing legislation, direct effect refers to the ability of an individual to use a legally binding act directly in a national court, a distinction that the Court has not always made clear in its early jurisprudence (see eg Variola, para 8). 6.3.3.2

Direct effect of directives The situation in relation to directives is more complicated. It would seem clear that directives could not possibly have direct effect, as they are only instructions to the Member State to create or amend a national law so as to comply with the substance laid down in the directive. How could anyone claim any rights until the directive has been implemented into national law? Nevertheless, the Court was worried by the fact that not all Member States implemented all directives, not only on time but also correctly. Should individuals be deprived of their rights by the failure of a Member State to meet its obligations? The Court answered this question in the negative by extending direct effect to directives in the landmark Van Duyn case. This decision was and is controversial, because it could be argued that it is plainly contrary to what the drafters of the Treaty might have originally intended when they invented directives. In Ratti (para 22) the Court held that the justification for applying direct effect to directives was to stop a Member State from relying on its own failure to implement – a form of estoppel. As the Court explained later, the aim of giving direct effect to directives is ‘to prevent the State from taking advantage of its own failure to comply with [Union] law’ (Marshall, para 49 and Dominguez, 6.2.3.2 above, para 38).

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ca ple In Case 41/74 Van Duyn v Home Office [1974] ECR 1337, Miss Van Duyn, a Dutch woman, m exa wished to take up a job as a secretary with the Church of Scientology, but was refused admission to the UK on the ground of public policy because the activities of the Church of Scientology were then thought to be socially harmful (see further 20.5.2.1). She challenged this refusal on the basis of her right of freedom of movement for workers under Article 48 EEC (now Article 45 TFEU), Regulation 1612/68 (now Regulation 492/2011) (see further 15.4.2) and, notably, Article 3(1) of former Directive 64/221/EEC on the co-ordination of special measures concerning the movement and residence of foreign nationals which are justified on grounds of public policy, public security or public health. However, the UK had not adopted the wording of Article 3(1) of the Directive and so argued that Miss Van Duyn could have no rights. The Court held that even a directive could have direct effect, provided it was unconditional, clear and precise. As a result of this decision, the difference between directives and regulations could be seen as rather limited. Perhaps as a consequence of this concern, the Court attached two restrictions to the direct effect of directives. First, no directive can have direct effect until after the date for implementation has passed. In Ratti the Court explained that after the deadline for the implementation of a directive, a State cannot use national law against individuals (para 24). This is a rather convoluted way to say that a directive can only produce direct effect after the deadline for transposition into national law. In Becker, as the State had failed to adopt implementing measures within the prescribed period for transposition, it was possible to rely on the directive against a national provision incompatible with it (Case C-8/81 Becker v Finanzamt Münster-Innenstadt EU:C:1982:7, para 25; see also Faccini Dori, para 25). No right can be derived from a directive even if it has been transposed into national law by the deadline for transposition. But if a Member State passes legislation in advance of the deadline, it is obliged to refrain from adopting measures, whether or not these measures are concerned with the transposition of the directive (Case C-14/02 ATRAL v Etat belge EU:C:2003:265, paras 58–59), that might compromise the result prescribed in the directive (Case C-129/96 Inter-Environnement Wallonie SBL v Région Wallone [1997] ECR I-7411, para 50; Case C-2/18 Lietuvos Respublikos Seimo narių grupė EU:C:2019:962, para 55). However, this can apply only where the defendant is a Member State body. The second restriction is that directives can only have vertical direct effect. In Marshall, Ms Marshall complained that under the Social Security Act 1975, she was forced to retire at the age of 62 whereas men could work until they reached the age of 65. This was regarded as discrimination on the ground of age contrary to the 1976 EC Directive on Equal Treatment, which required equal retirement ages. However, the UK had not implemented the Directive. If the defendant was a private body, it would be unfair to blame it for the non-implementation of the Directive. This locates the rationale for the direct effect of directives not in the nature of the instrument itself, but in the behaviour of the Member State. As the Court observed, according to Article [288 TFEU] the binding nature of a directive, which constitutes the basis for the possibility of relying on the directive before a national court, exists only in relation to ‘each member state to which it is addressed’. It follows that a directive may not of itself impose obligations on an individual and that a provision of a directive may not be relied upon as such against such a person … (para 48)

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As Ms Marshall worked in the public sector (an emanation of the State – see below), she could rely on the 1976 Directive. This ruling of course produces all kind of anomalies. If Ms Marshall had worked in the private sector, she could not have relied on the directive. Some therefore argued that the Court should push the law on and give horizontal direct effect to directives. Yet in Faccini Dori (para 20), the Court reiterated its position that a directive cannot impose obligations on an individual (see also Pfeiffer, 6.2.3.2 above, para 108; Joined Cases C-387/02, C-391/02 and C-403/02 Criminal Proceedings against Berlusconi, Adelchi and Dell’Utri and Others EU:C:2005:270, para 73; Popławski, 6.2.3.1 above, para 67; Case C-193/17 Cresco Investigation GmbH v Achatzi EU:C:2019:43, para 73), and, in Smith, it spelled out that a directive cannot be used in a private dispute to disapply national legislation that is contrary to the directive (6.2.3 above, para 44, see also Cresco, para 73) even if the provision is clear, precise and unconditional (para 43). Such rulings are based on the idea that to grant horizontal direct effect to directives would override the distinction between directives and regulations as set out originally in the EC Treaty and now in the TFEU. As the Court clearly stated: If the possibility of relying on directives that have not been transposed or have been incorrectly transposed were to be extended to the sphere of relations between individuals, that would amount to recognising a power on the part of the European Union to enact obligations for individuals with immediate effect, whereas it has competence to do so only where it is empowered to adopt regulations. (Cresco, para 72) Since directives can only be relied on against the State, ‘whether as employer or as public authority’ (Dominguez, para 38), it becomes extremely important to define what counts as a public body. There are some obvious ones: government, central and local or decentralised authorities (Smith, 6.2.3 above, para 45), health authorities and the police. Yet the Court adopted a broad definition of the State in order to mitigate the effect of the lack of horizontal direct effect of directives. In Case C-188/89 Foster and Others v British Gas plc [1990] ECR I-3133, the Court spelled out three criteria to determine whether a particular body is an ‘emanation of the State’ (note that whilst the concept of ‘emanation of the State’ does not appear per se in the jurisprudence of the Court, it does under the section ‘Title and reference’ of Court cases (see eg Case C-413/ 15 Farrell v Whitty and Others EU:C:2017:745) and in the opinions of the Advocates General (see eg Farrell, Opinion of the Advocate General Sharpston EU:C:2017:492)). The body must: (a) be made responsible by the Member State for providing a public service; (b) provide the service under the control of the State; (c) have special powers to provide that service. This was confirmed in Dominguez (para 39) and Case C-371/13 Indeliu ir investiciju draudimas and Nemaniunas EU:C:2015:418, para 59. It should, however, be noted that the case law is not entirely consistent on this point. In some cases, the Court had stressed that the test was made up of cumulative elements (see Foster, para 20); in other decisions it had implicitly suggested an alternative use of the last two requirements (see Foster, para 18 and Case C-297/03 Sozialhilfeverband Rohrbach v Arbeiterkammer Oberösterreich and Österreichischer Gewerkschaftsbund [2005] ECR 4305, para 27). In Farrell the Court confirmed that a directive can be relied on against a body that does not display all the characteristics listed in Foster (para 43). In other words, the criteria are disjunctive. As a result, the scope of vertical direct effect of directives is even wider

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and so offers better protection for individuals under EU law. Also, the Court seemed to indicate that for a public body to be considered an ‘emanation’, it must fulfil two conditions: (1) (a) the Member State makes the body responsible for providing a public service, or (b) the body is subject to Member State control; and (2) (c) the body has special powers to provide the service (see paras 33–35). The combination (a) + (c) under the formula ‘[o]rganisations or bodies that are required, by a public body, to perform a task in the public interest and have been given, for that purpose, special powers may also be treated as comparable to the State’ is confirmed by later and more recent case law (Case C-17/17 Hampshire v The Board of the Pension Protection Fund EU:C:2018:674, para 55 and Pensions-Sicherungs-Verein WaG v Bauer EU:C:2019:1128, para 48). This wide definition consequently covers private bodies endowed with public functions, such as: (a) regional and local government (Fratelli, 6.2.3.1 above); (b) a Chief Constable (Case 222/84 Johnston v Chief Constable of the Royal Ulster Constabulary [1986] ECR 1651); (c) a corporation under State control (although some conditions have been attached) (Doughty v Rolls Royce Plc [1992] 1 CMLR 1045); (d) a school receiving State funding (NUT v St Mary’s School [1997] 3 CMLR 630); (e) a motor insurance company (Farrell); (f) a pension fund (Pensions-Sicherungs-Verein WaG v Bauer); but not an ‘association governed by private law, even if it has a social objective’ (Case C-176/12 Association de médiation sociale v Union locale des syndicats CGT et al EU:C:2014:2, para 37). Once a body is deemed to be an emanation of the State, it must comply with the directive as soon as the implementation deadline has passed and irrespective of whether the directive has or has not been implemented by the State. The State can, however, rely on the unimplemented measures of the directive (provided they have direct effect) to oblige an emanation of the State to comply with the directive (Case C-425/12 Portgas – Sociedade de Produção e Distribuição de Gás SA v Ministério da Agricultura, do Mar, do Ambiente e do Ordenamento do Território EU:C:2013:829, para 38). If despite this broad interpretation of the concept of ‘emanation of a State’ an injured party cannot invoke a directive, it can then rely on State liability (see 7.3) to obtain compensation for any loss sustained (Dominguez, para 43). 6.3.3.3

Direct effect of decisions Decisions are directly applicable (see 4.3.2.1) and thus, as with regulations, it was relatively easy for the Court to state that decisions or provisions thereof had direct effect. Also, as decisions are legally binding under Article 288 TFEU (formerly Article 189 TEC), individuals must be able to invoke them if they are affected by such decisions (Grad, 6.3.1 above, para 5; Case C-18/08 Foselev Sud-Ouest SARL v Administration des douanes et droits indirects EU:C:2008:647, para 11). In Grad, the Court explained that the direct effect of a provision depended on whether it was ‘unconditional and sufficiently clear and precise to be capable of producing direct effects in the legal relationship between the Member States and those subject to their jurisdiction’ (para 9; see also Case C-156/91 Hansa Fleisch Ernst Mundt GmbH & Co KG v Landrat des Kreises Schleswig-Flensburg EU:C:1992:423, paras 12–13). That being said, only the decision’s specific addressees may rely on it. For example, in Foselev the

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decision was addressed to France and could only ‘be relied on as against that Member State’ (para 11, see also Hansa Fleisch, para 20). Furthermore, in case of decisions addressed to States, they must be implemented within a certain timeframe and therefore, like directives (see eg Case C-577/16 Trinseo Deutschland Anlagengesellschaft mbH v Germany, Opinion of AG Saugmandsgaard Øe EU:C:2017:975, para 100), they can only be relied on by individuals against a State if the State fails to adopt implementing measures before the deadline or if it does adopt such measures but incorrectly (Hansa Fleisch, paras 19–20).

6.3.4 Direct effect of international agreements Article 216(2) TFEU stipulates that: [a]greements concluded by the Union are binding upon the institutions of the Union and on its Member States. The ECJ has expressly stated that such agreements are part of the European legal system from the moment they enter into force, and this without the need for an act of incorporation (Case 181/73 R & V Haegeman v Belgium [1974] ECR 449, para 5). The rulings of the Court have ensured some consistency in the application and interpretation of such agreements. In particular, the Court has spelled out a two-stage test to determine the direct effect of international agreements: (a) The Court examines whether the agreement as a whole is capable of containing effective provisions (Case 104/81 Hauptzollamt Mainz v CA Kupferberg & Cie KG aA [1982] ECR 3641, para 17). If it is not, then the Court looks at the agreement’s purpose and nature (Case 12/86 Demirel v Stadt Schwäbisch Gmünd [1987] ECR 3719, para 14), as well as at its spirit and general scheme, to determine whether it has direct effect (Joined Cases 21–24/72 International Fruit Company NV and Others v Produktschap voor Groenten en Fruit [1972] ECR 1219, para 20). (b) Then the Court investigates whether the specific provision at stake has direct effect, in other words whether it is clear, precise and unconditional (Demirel, para 14). As the Court explained, to assess the direct effect of a provision of an agreement, it uses the same criteria as those applied ‘to determine whether the provisions of a directive are directly applicable’ (Case C-167/17 Klohn v An Bord Pleanála EU:C:2018:833, para 33). That being said, the Court has exercised great judicial restraint, and few agreements and provisions thereof have been deemed to have direct effect. The Court has explained that agreements that are the subject of international negotiations are better left to the legislative and executive bodies of the EU: To accept that the role of ensuring that [EU] law complies with those rules devolves directly on the [Union] judicature would deprive the legislative or executive organs of the [Union] of the scope for manoeuvre enjoyed by their counterparts in the [Union’s] trading partners. (Case C-149/96 Portugal v Council [1999] ECR I-8395, para 46) When provisions of international agreements do have direct effect, such direct effect is both vertical and horizontal (Case C-138/00 Deutscher Handballbund eV v Kolpak [2003] ECR I-4135). When they do not have direct effect, it might be possible to use the principle of consistent interpretation (see 6.2.3.2) which ensures that EU acts (ie secondary legislation) are interpreted in the light of the agreements (Case C-61/94

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Commission v Germany (Re IDA) [1996] ECR I-3989, para 52). Another approach, based on the principle of implementation, has two strands: (a) either the EU act is adopted with a view to implementing an obligation specified in an agreement (Case C-69/89 Nakajima All Precision Co Ltd v Council [1991] ECR I-2069); or (b) the EU act expressly refers to the provision in the agreement (Case 70/87 Fédération de l’industrie de l’huilerie de la CEE (Fediol) v Commission [1989] ECR 1781) and then the concept of indirect effect can be used (see eg Case T-19/01 Chiquita Brands International, Inc and Others v Commission [2005] ECR II-315).

6.3.5 Circumventing the lack of horizontal direct effect of directives: indirect effect, triangular situations, incidental effect and the fundamental rights approach The lack of horizontal direct effect of directives means that individuals might not be able to assert their rights in a national court if the State has failed to implement the directive or has done so but incorrectly and they are involved in a private dispute. The jurisprudence of the Court, however, shows that there are ways for individuals to circumvent the lack of horizontal direct effect of directives. 6.3.5.1

Indirect effect The von Colson jurisprudence (6.2.3 above) is of particular importance to remedy the lack of direct effect of directives. The so-called indirect effect of EU law provisions (for an overview of the CJEU’s methods in developing the doctrine of indirect effect, see 8.6) provides that domestic law has to be interpreted in the light of those provisions (see 6.2.3.2). It is of particular use ‘where a provision of a directive lacks direct effect, be it that the relevant provision is not sufficiently clear, precise and unconditional to produce direct effect or that the dispute is exclusively between individuals’ (Case C212/04 Adeneler and Others v Ellinikos Organismos Galaktos (ELOG) [2006] ECR I6057, para 113).

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ca ple In Case 14/83 Von Colson and Kamann v Land Nordrhein-Westfalen [1984] ECR 1891, two m exa women were discriminated against in seeking work, one in the public sector and one in the private sector. The 1976 EC Directive on Equal Treatment required Member States to set up a system for giving redress to victims of sex discrimination. Germany had given them a right to sue, but only for wasted travelling expenses. With regard to this specific requirement, the Directive did not have direct effect, and would in any case have helped only one of the women. The ECJ held that the national courts were obliged to try to interpret their own domestic law in such a way as to give effect to EC laws, including unimplemented directives and directives that did not have direct effect. In this case it was relatively easy to find an interpretation of the German law that would give effect to the directive. Indeed, the German law had been intended all along to comply with EC law, and it would be normal for a national court to try hard to find a way of interpreting a law that would give the effect intended. As a result, the duty of consistent interpretation may lead to the indirect implementation of a directive. In the Von Colson case, the domestic law was an attempt at transposing a directive and so the Court stressed that in applying the national law and in particular the provisions of a national law specifically introduced in order to implement [a] Directive …, national courts are

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required to interpret their national law in the light of the wording and the purpose of the directive in order to achieve the result referred to in the third paragraph of Article [288]. (Von Colson, para 26; see also Dominguez, 6.2.3.2 above, para 24) Later, the Court noted that should the national law be the result of the implementation of a directive, then the national court must assume ‘that the Member State, following its exercise of the discretion afforded to it under that provision, had the intention of fulfilling entirely the obligations arising from the directive concerned’ (Pfeiffer, 6.2.3.2 above, para 112). Another problem relates to national law that was adopted prior to a directive and cannot therefore have been intended to give effect to it. Nonetheless, in Marleasing SA v La Comercial Internacional de Alimentaciòn SA [1990] ECR I-4135, the Court held that the Spanish courts had the duty to interpret national law as far as possible in the light of EU law, and this duty would extend to all national law, including national law that pre-existed EU law (here, the interpretation of a provision of the Spanish Civil Code in light of Company Directive 68/151 which had not yet been implemented by Spain). As a result, the national court must favour ‘the interpretation of the national rules which is the most consistent with [the purpose of achieving the objective sought by those provisions] in order thereby to achieve an outcome compatible with the provisions of the directive’ (Klohn, 6.3.4 above, para 34). This obviously gives national courts quite some leeway to determine the objectives of the provisions of the directive. Yet, in some instances the Court has expressly told the national courts what these objectives were (Klohn, para 35). Indirect effect has, however, its limitations. First, it can only be used if there is national law that governs similar issues and situations. It is otherwise not possible to read national law in light of EU law. Secondly, indirect effect can be used only after the deadline for transposition of the directive has expired (Adeneler and Others, paras 114–115; Klohn, para 34) as States should first be given a chance to transpose the directive into national law. It can, however, be used ‘to render the future effects of situations which arose under the old rule immediately compatible with the provisions of that directive’ (Klohn, para 45). It should be noted that even if the national court is unable to interpret national law in conformity with a directive, a individual is still allowed to use the concept of State liability (see 7.3) to seek compensation for any damage suffered owing to the State’s lack of compliance with EU law (Case C-316/13 Fenoll v Centre d’aide par le travail ‘La Jouvene’, Association de parents et d’amis de personnes handicapées mentales (APEI) d’Avignon EU:C:2015:200, para 48). See Figure 6.3.

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Direct effect No

Yes

National law? No

Yes No indirect effect possible

Pre-dates directive (Marleasing)

Post-dates directive (Von Colson) Capable of being interpreted as far as possible in the light of directive? (Pfeiffer) Without distortion of domestic law? (Pfeiffer) Interpretation in line with general principles of EU law? (Kolpinghuis) Indirect effect possible

Figure 6.3 Direct and indirect effect in EU law

6.3.5.2

Triangular situations One way of obtaining some form of horizontal direct effect is by claiming that a directive has negative consequences for another individual who is not a party to the domestic court proceedings. In this case, the individual brings a case against the Member State when in fact the true target of the legal action is another individual. Typical cases involve a permit holder and someone who objects to the permit, usually on the basis of EU environmental law, or a public contract being awarded to a third party although it appears to be in violation of a directive. In this context, the failure of the competent authorities delivering the permit triggers a duty of sincere cooperation for the national court to revoke or suspend the consent decision or, alternatively, award compensation for the harm suffered. It should, however, be noted that such an approach has not been used since the Wells case.

e

In Case C-201/02 R (Wells) v Secretary of State for Transport, Local Government and the cas ple m Regions [2004] ECR I-748, the applicant, Ms Delena Wells, owned a house next to a exa disused quarry. The quarry was granted a permit to start its mining operations. Ms Wells claimed that such a permit had been delivered without an environmental impact assessment having been carried out, which, she argued, did not comply with Directive 85/337/EEC. The Court held that the principle of legal certainty prevents directives from creating obligations for individuals. For them, the provisions of a directive can only create rights … Consequently, an individual may not rely on a directive against a Member State where it is a matter of a State obligation directly linked to the performance of other obligation falling, pursuant to that directive, on a third party … On the other hand, mere adverse repercussions on the rights of third parties, even if the repercussions are certain, do not justify preventing an individual from invoking the provisions of a directive against the Member State concerned. … (paras 56 and 57)

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The Court agreed that the directive had been violated, and as a consequence the consent had to be withdrawn from the quarry or suspended in order that an environmental impact assessment might be carried out.

6.3.5.3

Incidental effect Incidental effect, whereby an individual uses a directive to require the Member State to give another individual a right or deprive him of one, is another way of claiming some form of horizontal direct effect. Incidental effect is defined as the application of a directive that incidentally affects the legal position of a private party but does not impose any obligations on the individual (Case C-194/94 CIA Security International SA v Signalson SA and Securitel SPRL [1996] ECR I-2201 and Case C-443/98 Unilever Italia SpA v Central Foods SpA [2000] ECR I-7535). Whilst no further cases have been decided using the incidental effect, the Court has confirmed the validity of this approach in Smith, stressing that such cases were not called into question (6.2.3 above, para 51). The Court reiterated that such cases dealt with ‘the adoption of national technical regulations that did not comply with procedural obligations’ set out in a directive (para 52), and there were procedural rather than substantive obligations at stake. It was a ‘substantial procedural defect’ that allowed for the disapplication of the national regulations.

ase le

c p In Case C-443/98 Unilever Italia SpA v Central Foods SpA [2000] ECR I-7535, Directive 83/ xam e 189 prescribed certain procedures to be followed when a Member State intended to adopt technical regulations. The purpose of those procedures was to facilitate the proper functioning of the internal market by obviating the restrictions on the free movement of goods that might arise from Member States’ technical requirements for goods marketed or used within their territories. A Member State that intended to adopt such provisions was required to notify those provisions in advance and then refrain from enacting them for a specified standstill period, in order to allow the Commission and the other Member States to submit observations concerning possible obstacles to trade at a stage at which they could be taken into account, and to allow the legislature, if it thought fit, to adopt an act regulating the field in question. The question referred to the Court by an Italian court concerned civil proceedings between individuals arising from a contract, and whether a national court should disapply a national technical regulation that, although notified to the Commission in accordance with Council Directive 83/189, was adopted before the expiry of the ‘standstill’ period applicable under that Directive. In its ruling, the Court responded: … a national court is required, in civil proceedings between individuals concerning contractual rights and obligations, to refuse to apply a national technical regulation which was adopted during a period of postponement of adoption prescribed in Article 9 of Directive 83/189. (para 52)

6.3.5.4

The general principles approach Another tool used by the Court of Justice is to refer to the general principles of EU law. In Mangold (Case C-144/04 Mangold v Helm [2005] ECR I-9981), the Arbeitsgericht (Labour Court) of Munich referred to the ECJ three questions on the interpretation of Council Directive 1999/70/EC of 28 June 1999 concerning the framework agreement on fixed-term work (concluded by the European Trade Union Confederation, the Union of Industrial and Employers’ Confederations of Europe

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(renamed ‘BusinessEurope’ in 2007) and the European Centre of Enterprises with Public Participation and of Enterprises of General Economic Interest) and Council Directive 2000/78/EC of 27 November 2000 establishing a general framework for equal treatment in employment and occupation. The national court wished to know whether, in the context of a dispute between private parties, those directives precluded a national rule allowing older people to be employed on fixed-term contracts with no restrictions. In essence, without giving horizontal direct effect to the directives concerned, the Court concluded that: The principle of non-discrimination on grounds of age must thus be regarded as a general principle of [EU] law. … Consequently, observance of the general principle of equal treatment, in particular in respect of age, cannot as such be conditional upon the expiry of the period allowed the Member States for the transposition of a directive intended to lay down a general framework for combating discrimination on the grounds of age, in particular so far as the organisation of appropriate legal remedies, the burden of proof, protection against victimisation, social dialogue, affirmative action and other specific measures to implement such a directive are concerned. … It is the responsibility of the national court to guarantee the full effectiveness of the general principle of non-discrimination in respect of age, setting aside any provision of national law which may conflict with [EU] law, even where the period prescribed for transposition of that directive has not yet expired. (paras 75, 76 and 78) A similar position was adopted in Kücükdeveci. Again, on a reference from a German court, this case was an opportunity for the Court of Justice to clarify the legal rules governing the general principle of non-discrimination on grounds of age, and the function which that principle fulfils in a situation in which the time-limit for the transposition of the abovementioned Council Directive 2000/78/EC had expired and the proceedings involved two private parties. Again, without resorting to horizontal direct effect, the Court of Justice confirmed the Mangold ruling: It is for the national court, hearing proceedings between individuals, to ensure that the principle of non-discrimination on grounds of age, as given expression in Directive 2000/78, is complied with, disapplying if need be any contrary provision of national legislation, independently of whether it makes use of its entitlement, in the cases referred to in the second paragraph of Article 267 TFEU, to ask the Court of Justice of the European Union for a preliminary ruling on the interpretation of that principle. (Kücükdeveci, para 56) Yet, this approach has three limitations. First, the invoked directive must ‘be regarded as giving concrete expression to a general principle of EU law’ (Smith, 6.2.3 above, para 48). Secondly, the individual must be able to identify a general principle. In this regard, it is interesting to note that whilst there is a general principle of equal treatment sensu lato, the Court has in some instances refined its approach referring expressly to the prohibition of discrimination on grounds of age and the prohibition of discrimination on grounds of religion or belief (Case C-414/16 Egenberger v Evangelisches Werk für Diakonie und Entwicklung eV EU:C:2018:257). Whether the prohibition of discrimination on the basis of other grounds (such as those listed in Article 19(1) TFEU or Article 21 of the Fundamental Charter which cover a wider range of grounds) could be viewed as a general principle of EU law is unclear. Its reference to Article 21 of the Fundamental Charter in Egenberger, however, seems to

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indicate that the Court might consider the Charter as an inspiration for establishing general principles of EU law. Third, in Dansk Industri, the Court added that the general principle prohibiting discrimination on grounds of age can only be used if the given situation ‘fall[s] within the scope of the prohibition of discrimination laid down by Directive 2000/78’ (Dansk Industri, 6.2.3.2 above, para 24). The main advantage of the general principle approach is that, as general principles are horizontally applicable, they can be invoked in disputes between private parties (provided it fulfils the above-mentioned requirements). In Egenberger, the Court explained that the prohibition of all discrimination ‘is sufficient in itself to confer on individuals a right which they may rely on as such in disputes between them in a field covered by EU law’ (para 76). The general principle approach was originally rather controversial and has recently been put into question by the Danish Supreme Court in Ajos, as it refused to disapply national law that was contrary to the general principle of non-discrimination on the basis that the travaux préparatoires of the Accession Act of Denmark did not refer to the Mangold case law. Thus, overall, it can be agreed upon that the Court of Justice has found a number of ways to mitigate the lack of horizontal direct effect of directives.

6.4 Further reading Avbelj M, ‘Supremacy or Primacy of EU Law – (Why) Does it Matter?’ (2011) 17 European Law Journal 744. Craig P, ‘The Legal Effect of Directives: Policy, Rules and Exception’ (2009) 34 EL Rev 349. Cremona M, ‘The Judgment – Framing the Argument’ in Court of Justice of the European Union, 50th Anniversary of the Judgment in Van Gend en Loos 1963–2013, Conference Proceedings, 13 May 2013 (OPUE, Luxembourg, 2013) 23. Dougan M, ‘Primacy and the Remedy of Disapplication’ (2019) 56 CML Rev 1459. Dougan M, ‘In Defence of Mangold?’ in Arnull A et al (eds), A Constitutional Order of States? Essays in EU Law in Honour of Alan Dashwood (Hart Publishing, 2011) 219. Dougan M, ‘When Worlds Collide! Competing Visions of the Relationship between Direct Effect and Supremacy’ (2007) 44 CML Rev 931. Doukas D, ‘The Verdict of the German Federal Constitutional Court on the Lisbon Treaty: Not Guilty, but Don’t Do it Again!’ (2009) 34 EL Rev 866. Drake S, ‘The Principle of Primacy and the Duty of National Bodies Appointed to Enforce EU Law to Disapply Conflicting National Law: An Garda Síochána’ (2020) 57 CML Rev 557. Drake S, ‘Twenty Years after Von Colson: The Impact of “Indirect Effect” on the Protection of the Individual’s Community Rights’ (2005) 30 EL Rev 329. Grosser A, ‘The Federal Constitution Court’s Lisbon Case: Germany’s “Sonderweg”: An Outsider’s Perspective’ (2009) 10 German Law Journal 1263. Holdgaard R, Elkan D and Krohn Schaldemose G, ‘From Cooperation to Collision: The ECJ’s Ajos Ruling and the Danish Supreme Court’s Refusal to Comply’ (2018) 55 CML Rev 17. Koutrakos P, ‘Longing for Less Interesting Times? The German Federal Constitutional Court and the Supremacy of EU Law’ (2020) 45 EL Rev 293.

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Lackoff K and Nyssens H, ‘Direct Effect of Directives in Triangular Situations’ (1998) 23 EL Rev 397. Lenaerts K and Corthaut T, ‘Of Birds and Hedges: The Role of Primacy in Invoking Norms of EU Law’ (2006) 31 EL Rev 287. Martines F, ‘Direct Effect of International Agreements of the European Union’ (2014) 25(1) EJIL 149. Mayer F, ‘Defiance by a Constitutional Court – Germany’ in Jakab A and Kochenov D (eds), The Enforcement of EU Law and Values: Ensuing Member States’ Compliance (OUP, 2017) 403. Moens G and Trone J, ‘The Effect of EU Law upon National Law’ in Moens G and Trone J (eds), Commercial Law of the European Union (Springer Verlag, 2010) 367. Niedobitek M, ‘The Lisbon Case of 30 June 2009: A Comment from the European Law Perspective’ (2009) 10 German Law Journal 1267. Payandeh M, ‘Constitutional Review of EU Law after Honeywell: Contextualising the Relationship between the German Constitutional Court and the EU Court of Justice’ (2011) 48 CML Rev 9. Pernice I, ‘The Autonomy of the EU Legal Order – Fifty Years After Van Gend’ in Court of Justice of the European Union, 50th Anniversary of the Judgment in Van Gend en Loos 1963–2013, Conference Proceedings, 13 May 2013 (OPUE, Luxembourg, 2013) 55. Roes T, ‘Case Law: Case C-555/07, Seda Kucukdeveci v. Swedex Gmbh & Co KG’ (2010) 16 Columbia Journal of European Law 497. Schiek D, ‘The ECJ Decision in Mangold: A Further Twist on Effects of Directives and Constitutional Relevance of Community Equality Legislation’ (2006) 35 Industrial Law Journal 329. Schütze R, European Constitutional Law (Cambridge University Press, 2015). Spieker LD, ‘Framing and Managing Constitutional Identity Conflicts: How to Stabilize the Modus Vivendi between the Court of Justice and National Constitutional Courts’ (2020) 57 CML Rev 361. Thüsing G and Horler S, ‘Case Note: Seda Kucukdeveci v Swedex’ (2010) 47 CML Rev 1161. Weiler JHH, ‘Revisiting Van Gend en Loos: Subjectifying and Objectifying the Individual’ in Court of Justice of the European Union, 50th Anniversary of the Judgment in Van Gend en Loos 1963–2013, Conference Proceedings, 13 May 2013 (OPUE, Luxembourg, 2013) 11.

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The principles of supremacy and direct effect ensure that individuals who have been endowed with rights by EU law can benefit from these rights. In particular, the Court of Justice has ensured that these rights are effective, for they can be raised in national courts, which are then obliged to use a range of techniques, such as disapplying domestic law or interpreting domestic law in the light of EU law. The principle of supremacy has been challenged, especially by national higher and constitutional courts, but is generally accepted. The principle of direct effect applies to Treaty provisions, EU acts and international agreements, but to varying degrees. For example, directives have only vertical direct effect in contrast to Treaty provisions, international agreements and other EU acts, which also have horizontal effect. However, to minimise the legal effect of the lack of horizontal direct effect of directives, the Court of Justice has established the principle of indirect effect and the principle of incidental effect, as well as used the general principles of EU law.

Test Your Knowledge

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Critically evaluate the doctrines of direct effect and supremacy as the twin constitutional pillars of EU law. Trace the development of the doctrine of direct effect from its inception in the case law of the Court of Justice, with reference to primary and secondary EU legislation, and explain the extent of its contributions to EU law and the development of the rights of the individual. The doctrine of indirect effect addresses appropriately the shortcomings of the rules relating to direct effect. Discuss. (This is a fictional situation.) Jacek, a Polish national, works in Cryptonia (a fictional Member State) as a fruit and vegetable picker. He is paid the minimum wage, irrespective of how many kilos of fruit and vegetables he picks. In contrast, Crypton nationals are paid the minimum wage plus a productivity bonus, which can be up to 20% of their harvest. Moreover, although he has been working for Fruit & Veg Ltd for the last two years, Jacek is hired on a temporary basis (twomonth contracts). (Fictitious) Directive 888/2013 stipulates that if an individual has been continuously employed for two years with the same company, the employer is obliged to offer a contract of employment of at least one year’s duration. Although the deadline for the application of this directive has passed, Cryptonia has still not implemented it. In contrast, the (fictitious) Employment Act 2009 stipulates that such employers are required to incrementally lengthen the contract periods provided to temporary workers. Jacek tells his employer that he has rights under the European Treaties and Directive 888/2013, but the employer replies that EU law is irrelevant in Cryptonia, and even if it was relevant, national law would prevail. Jacek contacts you as his lawyer and asks you: (a) Whether EU law is irrelevant, and whether national law does indeed prevail as the employer claims? (b) If he goes to court: (i) Can he rely on EU law to ensure that he is not discriminated against with regard to the entitlement to a productivity bonus? (ii) Can he rely on the directive against his employer with regard to the entitlement to a one-year contract?

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After reading this chapter, you will be able to understand: • the enforcement procedure under Article 258 TFEU • the role played by the Commission as the guardian of the Treaties and by the CJEU as the judicial body enforcing EU law • the principle of Member State liability as established and developed by the CJEU.

7.1 Introduction Under traditional international law, disputes concerning infringements of a treaty are settled among the States that are parties to it. Article 259 TFEU accordingly enables a Member State to bring proceedings before the CJEU against another Member State that it considers to be in breach of its Treaty obligations. However, that procedure has hardly ever been used (eg Case 141/78 France v United Kingdom [1979] ECR 2923; Case C-388/95 Belgium v Spain [2000] I-ECR 3123; Case C-364/10 Hungary v Slovak Republic EU:C:2012:630 and more recently Case C-591/17 Austria v Germany EU:C:2019:504). Rather, EU law is enforced via Article 258 TFEU, which endows the Commission and the CJEU with the power to enforce EU law, and via the case lawbased concept of State liability, to ensure that EU law is effective in the legal order of each Member State.

7.2 Enforcement actions against Member States under Articles 258 to 260 TFEU Article 258 TFEU gives the Commission the power to bring before the CJEU any Member State that is believed to have failed to fulfil the obligations imposed upon it by the Treaties. Article 258 TFEU provides: If the Commission considers that a Member State has failed to fulfil an obligation under the Treaties, it shall deliver a reasoned opinion on the matter after giving the State concerned the opportunity to submit its observations. If the State concerned does not comply with the opinion within the period laid down by the Commission, the latter may bring the matter before the Court of Justice of the European Union. Indeed, in pursuance of Article 17(1) TEU, the Commission is the guardian of the Treaties: The Commission shall promote the general interest of the Union and take appropriate initiatives to that end. It shall ensure the application of the Treaties, and of measures adopted by the institutions pursuant to them. It shall oversee the application of Union law under the control of the Court of Justice of the European Union. …

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The aims and purposes of Article 258 TFEU are: (a) to ensure compliance with and full application of EU law, as well as to deter Member States from potential violations; (b) to provide a procedure for dispute settlement; (c) to clarify the law for Member States so that they apply it in a correct manner. Article 258 TFEU clearly sets up two separate phases in the enforcement procedure: an administrative or pre-judicial phase, and a judicial phase. In cases where the Member State does not comply with the ruling of the CJEU finding it to be in breach of EU law, the Commission can then take the State to Court again and request financial penalties to be imposed upon the Member State.

7.2.1 The procedure The Commission may become aware of a possible infringement of the Treaties by a Member State through its own monitoring of the application of EU law, a complaint by a private party, petitions submitted to and questions asked by the European Parliament, information in the media, etc. In 2018, the Commission registered 3,850 new complaints. In that year, the three Member States against which most complaints were made were Italy, Spain and France. About a quarter of the complaints were made in the area of justice and consumers (European Commission, Monitoring the Application of European Union Law 2018 Annual Report, Part I: General Statistical Overview, at 12–13). The White Paper on European Governance issued by the European Commission on 25 July 2001 (COM (2001) 428) explains how the Commission decides whether or not to act upon possible breaches of EU law. The Commission will focus on: – The effectiveness and quality of transposition of directives as the most effective way of avoiding individual problems arising at a later stage. – Situations involving the compatibility of national law with fundamental [Union] principles. – Cases that seriously affect the [Union] interest (eg cases with cross-border implications) or the interests that the legislation intended to protect. – Cases where a particular piece of European legislation creates repeated implementation problems in a Member State. – Cases that involve Union financing. Such cases should be handled as a priority in the framework of formal infringement procedures. In other cases, other forms of intervention could be explored before launching formal infringement proceedings. (at 25) In practice there are four types of infringements (see European Commission, 2018 Annual Report, General Statistical Overview, at 10): (a) non-communication of measures transposing directives (eg the State has failed to notify the Commission of the implementation measures); (b) non-conformity of national measures (eg the State has failed to remove existing law that conflicts with EU law or to implement a directive (correctly)); (c) infringement of the Treaties, regulations or decisions (eg national legislation is not in conformity with EU law); (d) poor application of EU law (eg EU law is not applied correctly).

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Cases can be brought against the legislature, the government, the judiciary (Case C129/00 Commission v Italy EU:C:2006:656; Case C-416/17 Commission v France EU:C:2018:811), federal entities as well as against the population (Case C-265/95 Commission v France (Re Spanish Strawberries) [1997] ECR I-6959) as they are all deemed to be components of the Member State. Right from the beginning, the Court explained that … the liability of a Member State under Article [258 TFEU] arises whatever the agency of the State whose action or inaction is the cause of the failure to fulfil its obligations, even in the case of a constitutionally independent institution. (Case 77/69 Commission v Belgium [1970] ECR 237, para 15) After an initial assessment by the Commission, the great majority of complaints are dismissed ‘because either no EU laws were breached … or the correspondence did not qualify as a complaint’ or ‘the complainants withdrew their complaint’ (European Commission, 2018 Annual Report, General Statistical Overview, at 13). Even if the complaints do not fall into these categories, the Commission is not bound to pursue them. For example, in Case T-47/96 SDDDA v Commission [1996] ECR II-1559, the then Court of First Instance (now the General Court, see 8.3) explained: The Commission is not bound to initiate an infringement procedure against a Member State; on the contrary, it has a discretionary power of assessment, which rules out any right for individuals to require it to adopt a particular position. (para 42) In many cases, the Commission will decide not to act, especially when politically sensitive issues are present, and will try to find a settlement with the Member State concerned instead. If it declines to initiate proceedings, its decision cannot be challenged in the CJEU. In any case, throughout the procedure, complainants are informed by the Commission of the decisions taken. If the Commission decides to pursue a possible infringement, the Treaty requires it to follow a lengthy procedure, involving not just a judicial phase but also a pre-judicial or administrative phase that involves an informal and/or formal stage. 7.2.1.1

The pre-judicial (administrative) phase This phase gives the Member State the opportunity to explain its position: It is settled case-law that the purpose of the pre-litigation procedure is to give the Member State concerned an opportunity, on the one hand, to comply with its obligations under [EU] law and, on the other, to avail itself of its right to defend itself against the charges formulated by the Commission. (Case C-147/03 Commission v Austria [2005] ECR I-5969, para 22) Another aim of this pre-litigation procedure is to set out in clear terms the substance of the dispute (Case C-441/17 Commission v Poland EU:C:2018:255, para 64). Informal phase It must be noted that this phase is not expressly mentioned in Article 258 TFEU. To resolve compliance problems without having to resort to the infringement proceedings (see below), the European Commission set up in 2008 an EU Pilot scheme that allowed it to investigate the complaint, making discreet inquiries with the Permanent Representative of the Member State concerned. An online database and communication tool allowed the Commission to share information on the details of

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the case with the national government that was given 10 weeks to reply. As the scheme was successful in the 15 Member States that had originally taken part in the pilot, it was extended to all Member States. The EU Pilot tool was, however, reformed in 2017 as it was considered to be a hindrance to a more expeditious processing of infringement complaints (see Communication from the Commission, EU Law: Better Results through Better Application (2017/C 18/02) [2017] OJ C18/10). The EU Pilot is still used as a problem-solving mechanism but only if it ‘is seen as useful in a given case’ which means that not all infringement procedures will go through the informal phase. In 2018 the Commission opened 110 new EU Pilot files, three-quarters on its own initiative (European Commission, 2018 Annual Report, General Statistical Overview, at 15). The EU Pilot scheme is highly efficient as the majority of cases (about 75%) are cleared up at this point (European Commission, General Statistical Overview, at 16). Depending on the nature and substance of the information received, the Commission will or will not start the formal phase under Article 258 TFEU. It is interesting to note that almost all cases in 2018 that moved into the formal phase concerned the policy areas of energy and environment. Formal phase In the formal phase, the Member State concerned is informed by the Commission of the essence of the case against it in a formal letter. For example, in 2018 the Commission sent 644 letters of formal notice (European Commission, 2018 Annual Report, General Statistical Overview, at 18). The Commission should spell out in clear terms what the allegations are (Case 211/81 Commission v Denmark [1982] ECR 4547, paras 7–9), bearing in mind that the Commission must refer to an existing rather than a hypothetical or potential violation of EU law (Case C-341/97 Commission v Netherlands [2000] ECR I-6611): Also, in order for a letter of formal notice to be issued, a prior failure by the Member State concerned to fulfil an obligation owed by it must be alleged. However, it is clear that, at the time when a detailed opinion under Directive 83/189 is delivered, the Member State to which it is addressed cannot have infringed Community law, since the measure exists only in draft form. The contrary view would result in the detailed opinion constituting a conditional formal notice whose existence would be dependent on the action taken by the Member State concerned in relation to the opinion. The requirements of legal certainty, which are inherent in any procedure capable of becoming contentious, preclude such incertitude. (paras 18–20) The Member State is then given an opportunity to submit observations within a certain period of time (generally two months, less in case of urgency, or more taking into account the complexity of the matter). This was affirmed in the Case 293/85 Commission v Belgium (Re University Fees) [1988] ECR 305: [T]he Commission must allow Member States a reasonable period to reply to the letter of formal notice and to comply with a reasoned opinion, or, where appropriate, to prepare their defence. In order to determine whether the period allowed is reasonable, account must be taken of all the circumstances of the case. Thus, very short periods may be justified in particular circumstances, especially where there is an urgent need to remedy a breach of where the Member State concerned is fully aware of the Commission’s views long before the procedure starts. (para 14, emphasis added)

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Member States have, under Article 4(3) TEU, a legal duty to cooperate with the Commission’s investigations: Moreover, it should be noted that the failure to reply to the Commission’s requests has made the achievement of its task under the Treaty more difficult, and that it therefore breaches the obligation of cooperation laid down by [Article 4(3) TEU]. (Case 375/92 Commission v Spain [1994] ECR I-1985, para 25) If a State refuses to cooperate, then the Commission can use Article 258 TFEU for breach of the principle of sincere cooperation to obtain the required information (Case 240/86 Commission v Greece [1988] ECR 1835). The Commission usually decides within a year either to close the case, or to proceed on to the next step, ie the issuance of a reasoned opinion. Reasoned opinion If the Commission is not satisfied with the Member State’s response, it issues a reasoned opinion laying down a deadline for compliance. The reasoned opinion is a detailed explanation of the reasons that led the Commission to the conclusion that a Member State has failed to fulfil its obligation under EU law: Consequently, the reasoned opinion and the proceedings brought by the Commission must be based on the same complaints as those set out in the letter of formal notice initiating the pre-litigation procedure. … [T]he reasoned opinion … must contain a cogent and detailed exposition of the reasons which led the Commission to the conclusion that the Member State concerned had failed to fulfil one of its obligations under the Treaty. (Case C-441/02 Commission v Germany [2006] ECR I-3449, para 60) Whilst there are no set deadlines imposed on this stage (to allow sufficient time for negotiations), the Commission may set a time limit for compliance. If that deadline expires without the requisite steps having been taken, the Commission may then, and only then, initiate proceedings before the Court (Case 7/61 Commission v Italy [1961] ECR 317, 326). That being said, as the Court established in Case 247/87 Star Fruit Company SA v Commission [1989] ECR 291, the Commission is not obliged to bring the case before the Court: [I]t is clear from the scheme of Article [258] of the Treaty that the Commission is not bound to commence the proceedings provided for in that provision but in this regard has a discretion which excludes the right for individuals to require that institution to adopt a specific position. It is only if it considers that the Member State in question has failed to fulfil one of its obligations that the Commission delivers a reasoned opinion. Furthermore, in the event that the State does not comply with the opinion within the period allowed, the institution has in any event the right, but not the duty, to apply to the Court of Justice for a declaration that the alleged breach of obligations has occurred. (paras 11 and 12) Generally, proceedings cannot be brought by the Commission if the breach is terminated before the deadline set in the reasoned opinion (Case C-439/99 Commission v Italy [2002] ECR I-351, para 17) but, exceptionally, the Commission may still bring proceedings if it is able to prove that the Member State is guilty of a general and persistent failure to abide by EU law (Case C-494/01 Commission v Ireland [2005] ECR I-3331, para 32).

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The scope of the proceedings is limited to the infringements specified in the reasoned opinion. This means that no charges other than those in the reasoned opinion or in the original formal letter can be added to the court action: [T]he letter of formal notice from the Commission to the Member State concerned and then the reasoned opinion issued by it delimit the subject-matter of the dispute, so that it cannot thereafter be extended. Consequently, the reasoned opinion and the application must be based on the same complaints. (Case C-147/03 Commission v Austria [2005] ECR I-5969, para 23) Yet, this does not mean that the wording of the reasoned opinion and the application to the Court must be exactly the same (Case C-638/18 Commission v Romania EU:C:2020:334, para 49). Although the Commission cannot extend or modify the subject matter of the dispute, it can limit it by being more specific in its allegations and so by providing further information (paras 49–50). The Court has allowed for events that took place after the reasoned opinion was delivered to be included (Case 42/82 Commission v France EU:C:1983:88, para 20) as long as they were ‘of the same kind and constitute[d] the same conduct as those to which the application refer[red]’ (Case C-441/17 Commission v Poland EU:C:2018:255, para 74). In the case of a general and persistent failure to comply, the Court accepts the introduction of complementary elements relating to facts that postdate the reasoned opinion with a view to enabling the Commission to buttress its allegation of the generality and persistency of the State’s failure to abide by the relevant provisions (Case C-336/16 Commission v Poland EU:C:2018:94, paras 48–49 and Commission v Romania, paras 54–55). In Commission v Romania, the Court added that consequently the lack of an accurate date by which the State had not complied with the law to be specified by the Commission in the reasoned opinion does not render the Commission’s application inadmissible (para 59). However, if any new charges materialise then the Commission must start a new Article 258 procedure. in practice In Case C-416/17 Commission v France EU:C:2018:811, the Court provides a good description of the different phases of the pre-litigation procedure. 14. Following the judgments of the Conseil d’État (Council of State), the Commission received several complaints concerning the conditions for reimbursement of advance payments made by French companies which had received dividends of foreign origin. 15. Since the Commission was not satisfied with the information exchanged between it and the French Republic, on 27 November 2014, it sent a letter of formal notice to the French authorities in which it noted that certain conditions for the reimbursement of advance payments of tax established by the judgments of the Conseil d’État (Council of State) were likely to constitute infringements of EU law. 16. In its reply of 26 January 2015, the French Republic disputed the complaints made against it. On 29 April 2016, the Commission sent a reasoned opinion calling upon the French Republic to take steps to comply within a period of two months of receipt of that opinion. 17. Since the French Republic maintained its position in its reply of 28 June 2016, the Commission brought the present action for failure to fulfil obligations on the basis of Article 258 TFEU.

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The judicial phase Where an application is made to the Court, the Commission is required to prove that the obligation in question has not been fulfilled. The burden on the Commission is not easy to discharge (Case 96/81 Commission v The Netherlands [1982] ECR 1791, para 6). The procedure(s) There are two procedures. The first one, enshrined in Articles 258 and 260(1) TFEU, pre-dates the Lisbon Treaty and is the most common one. This is the procedure discussed in detail below. One of the novelties in the Lisbon Treaty is the addition of Article 260(3) TFEU according to which, if the action concerns a breach of the obligation to notify measures transposing a directive adopted under the legislative procedure, the Commission may bring the matter before the Court under Article 258 TFEU and combine it with a request to impose a lump sum or penalty payment for a specific amount. The reason for the existence of this new procedure is to give Member States stronger incentive to implement directives within deadlines and to ensure that EU legislation is genuinely effective (Case C-543/17 Commission v Belgium (High-speed Networks) EU:C:2019:573, para 52). It must be stressed that often these directives confer rights to EU citizens. The Commission can request a lump sum or a penalty payment for both a complete and a partial failure to notify measures adopted to transpose the directive (2011 Commission Communication (2011/C 12/01), para 19). As under the procedure under Article 258 TFEU, the Commission is not obliged to use Article 260(3); it is within its discretion to use its powers. It has mainly issued actions for a declaration that a Member State has failed to fulfil its obligations in cases where the period for transposition of the directive was exceeded by two years. However, unlike the situation under Article 260(2) TFEU (see 7.2.2 below), the Court may not in such cases impose amounts higher than those specified by the Commission (2011 Commission Communication, para 9). in practice According to the Commission’s 2018 Annual Report on the Monitoring of the Application of EU Law 2018 (Part I: General Statistical Overview): In 2018, the Commission continued to bring late transposition infringement cases to the Court of Justice with a request for daily penalties under Article 260(3) TFEU. It referred five Member States to the Court in 2018: Slovenia (three cases), Spain (three cases), and Belgium, Ireland and Romania (one case each). In 13 other cases, the Commission took a decision to refer them to Court but the Member States concerned adopted the required transposition measures, prompting the Commission to withdraw the case before the Court delivered its ruling.

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ca ple At the heart of the judgment in Case C-543/17 Commission v Belgium (High-speed m exa Networks) EU:C:2019:573 was the question whether Article 260(3) TFEU could only be invoked in cases where the Member State had failed to notify the transposition measures. The Commission brought action before the Court because some but not all of a directive’s provisions had been transposed into national law and notified to the Commission. The Court first drew a distinction between cases of non-communication and non-transposition on the one hand and cases of incorrect transposition on the other (para 56). It then reiterated that, under Article 260(2) TFEU, States were given an opportunity to challenge the Commission’s position (para 57). Under Article 260(3), it is not for the Court ‘to examine whether the national measures notified to the Commission ensure a correct transposition’ (para 59). In other words, a clear distinction should be made between actions brought under Article 260(2) and (3) TFEU. In this regard, the Court explained that the expression ‘obligation to notify measures transposing a directive … must be interpreted as referring to the obligation of the Member States to provide sufficiently clear and precise information on the measures transposing a directive’ (para 59). Based on such information, ‘it is for the Commission to establish … whether certain transposing measures are clearly lacking or do not cover all of the territory of the Member State in question’ (para 59). Defences Most cases brought by the Commission before the Court under Article 258 TFEU are won by the Commission. In 2018, only one out of 27 judgments was in a Member State’s favour (European Commission, 2018 Annual Report, General Statistical Overview, at 21). This is because, whilst there is a range of defences available to Member States, the Court will only accept a few of them. The Court will examine the defences presented before ruling on whether there has been a breach of EU law or not. In Case C-215/98 Commission v Greece [1999] ECR I-4913, the Court held that: an action based on Article [258 TFEU] requires only an objective finding of a failure by a Member State to fulfil its obligations and not proof of any inertia or opposition on the part of the Member State concerned. (para 15) Defences that are accepted fall within two categories: procedural errors and substantive errors made by the Commission. First, the defendant Member State may argue that the Commission has failed to comply with the procedural requirements imposed on it by the Treaties, notably whether time limits in the formal letter and the reasoned opinion are reasonable (see 7.2.1.1; Case 42/87 Commission v Belgium [1988] ECR 5445), that the scope of the case in the formal letter and the reasoned opinion is identical (Case 7/69 Commission v Italy [1970] ECR 111), and whether the Commission has indicated which measures the Member State is required to take to comply with its obligations. Secondly, the Member State may seek to establish that the Commission’s view of what EU law requires, or its understanding of national law or of what the Member State concerned has actually done, is incorrect (Case C-418/04 Commission v Ireland [2007] ECR I-10947). In cases where a Member State claims that the initial EU action was erroneous, the Court tends to remind the Member State that it could have challenged the legality of the EU measure under Article 263 TFEU. As a result, such a defence is limited to cases of ‘serious and manifest defects’ of an EU decision (Case C-226/87 Commission v Greece [1988] ECR 3611), the illegality of a regulation (Case 116/82 Commission v Germany [1986] ECR 2519) and where the Member State had exclusive competence (Case 6/69 Commission v France [1969] ECR 523).

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The Court also accepts the possibility of force majeure, ie that a State has ‘encounter[ed] temporarily insuperable difficulties preventing it from complying with its obligations’ (Case C-68/11 Commission v Italy EU:C:2012:815, para 64). However, it is not usually sympathetic to such claims: [A]lthough it is true that the bomb attack, which took place before 18 January 1979, may have constituted a case of force majeure and created insurmountable difficulties, its effect could only have lasted a certain time, namely the time which would in fact be necessary for an administration showing a normal degree of diligence to replace the equipment destroyed and to collect and prepare the data. The Italian government cannot therefore rely on that event to justify its continuing failure to comply with its obligations years later. (Case 101/84 Commission v Italy [1985] ECR 2629, para 16) Member States cannot use the principle of reciprocity either, claiming that other Member States have similarly not implemented the EU legislation (Joined Cases 52 and 55/95 Commission v France [1995] ECR I-4443; Case 232/78 Commission v France (Re Restrictions on Imports of Lamb) [1979] ECR 2729). It is no defence to argue that a provision of national law that is incompatible with the Treaties is not in practice applied (Case 167/73 Commission v France (Re French Merchant Seamen) [1974] ECR 359). The Court rejects this defence on the basis that the very existence of such a national law breaches EU obligations (Case C-381/92 Commission v Ireland [1994] ECR 215). Furthermore, administrative measures are not accepted as proper implementation: As the Court has consistently held in judgments concerning the implementation of directives, mere administrative practices, which by their nature are alterable at will by the authorities and are not given the appropriate publicity, cannot be regarded as constituting the proper fulfilment of a Member State’s obligations under the Treaty. (Case C-236/91 Commission v Ireland [1992] ECR I-5933, para 6) Internal circumstances, whether of a practical nature or in relation to its legal system, are not accepted as justification either (Case C-388/16 Commission v Spain EU:C:2017:548, para 41). In Case C-39/88 Commission v Ireland [1990] ECR I-4271, the Court held that … [it] is well established in the case law of the Court … that a Member State may not plead internal circumstances in order to justify a failure to comply with obligations and time-limits resulting from [EU] law. (para 11) On numerous occasions, the Court has explained that internal practical difficulties cannot be used as a defence as they would in fact allow a State ‘unilaterally to opt out of fulfilling its obligations’ (Case 128/78 Commission v United Kingdom (Tachographs) [1979] ECR I-419, para 10; Case C-39/98 Commission v Ireland (above), para 11). States’ claims pointing out socio-economic and financial challenges relating to the application or implementation of EU law have been dismissed (Case C-336/16 Commission v Poland EU:C:2018:94, paras 100–103). In particular, the Court will not accept the defence that the necessary amending legislation has been held up in parliament or that the delay in adopting national legislation was due to the dissolution of the national assembly, the temporary nature of the government and impending elections (Case C-388/16 Commission v Spain (above), para 41). Neither can the Member State claim that the lack of implementation or the incorrect implementation is due to the division of powers between central and regional

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authorities. In Case C-87/02 Commission v Italy [2004] ECR I-5975, the Court clearly spelled this out: First of all, it should be recalled that the fact that a Member State has conferred on its regions the responsibility for giving effect to directives cannot have any bearing on the application of Article [258 TFEU]. The Court has consistently held that a Member State cannot plead conditions existing within its own legal system in order to justify its failure to comply with obligations and time-limits resulting from [EU] directives. While each Member State may freely allocate internal legislative powers as it sees fit, the fact remains that it alone is responsible towards the [EU] under Article [258 TFEU] for compliance with obligations arising under [EU] law … (para 38) A Member State may even incur liability as a result of the actions of private individuals, if the Court decides that it has not done enough to protect the proper functioning of the internal market. This was established in the Spanish Strawberries case decided in 1997 (Case C-265/95 Commission v France [1997] ECR I-6959), involving acts of violence committed by French farmers: [I]n the present case the French Government has manifestly and persistently abstained from adopting appropriate and adequate measures to put an end to the acts of vandalism which jeopardize the free movement on its territory of certain agricultural products originating in other Member States and to prevent the recurrence of such acts. (para 65) Neither is it a good defence to argue that the aim of the infringement was to correct the effects of a breach by someone else, such as another Member State or an EU institution. In relation to an alleged violation by the EU institutions, the Court explained in Joined Cases 90 and 91/63 Commission v Luxembourg and Belgium [1964] ECR 625: [T]he Treaty is not limited to creating reciprocal obligations between the different natural and legal persons to whom it is applicable … [E]xcept where otherwise expressly provided, the basic concept of the Treaty requires that the Member States shall not take the law into their own hands. Therefore the fact that the Council failed to carry out its obligations cannot relieve the defendants from carrying out theirs. (para 631) After all, Defences Procedural mistakes by Commission [a] Member State cannot under any that are Substantive mistakes by Commission accepted circumstances unilaterally adopt, on its own authority, corrective measures or measures to Defences protect trade designed to [obviate] any failure Force majeure that might on the part of another Member State to comply Unlawful EU act be accepted with the rules laid down by the Treaty. (Case 232/78 Commission v France (Re Restrictions on Principle of reciprocity Imports of Lamb) [1979] ECR 2729, para 9) Internal difficulties Defences See Figure 7.1. that are not Division of powers within State Interim measures accepted Self-help It must be borne in mind that interim measures can Retaliation be granted by the Court under Article 279 TFEU: Figure 7.1 Defences to enforcement actions against The Court of Justice of the European Union Member States may in any cases before it prescribe any necessary interim measures.

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Indeed, as the time between the case being lodged with the Court and the Court’s judgment is often over two years, some activities can cause irreversible damage. The Court explained in Case C-246/89 R Commission v UK [1989] ECR 3125: Under Article 83(2) [now 160(3)] of the Rules of Procedure, interim measures such as those requested may not be ordered unless there are circumstances giving rise to urgency and factual and legal grounds establishing a prima facie case for the measures applied for. (para 21) For years, the Commission has been reluctant to request interim measures, and the Court is loathe to impose them. Interestingly enough, it is in the field of the protection of the environment that the Court has often granted them (see for example Cases C503/06 R Commission v Italy [2006] ECR I-141 and C-76/08 R Commission v Malta [2008] ECR I-64, where Member States were ordered by the Court to stop hunting activities, and Case C-441/17 R Commission v Poland EU:C:2017:877 in relation to forest management). In the past few years, the Court has, however, stressed that interim measures are an effective way ‘to ensure that there is no lacuna in the legal protection provided by the Court’ (Case C-441/17 R Commission v Poland (Polish Forest) EU:C:2017:877, para 43). As the Court explains, the procedure for interim measures is ‘ancillary to the main action to which it is an adjunct’ (para 95). Accordingly, the number of interim measures orders has increased. The Court has consolidated its jurisprudence, specifying that two requirements must be met for an interim measures order to be granted: (1) ‘it is established that such order is justified, prima facie, in fact and in law’ (fumus boni juris); and (2) the order ‘is urgent in so far as, to avoid serious and irreparable damage to the applicant’s interests, it must be made and produce its effects before a final decision is reached in the main action’ (para 29, see also Case C-619/18 R Commission v Poland EU:C:2018:1021, para 29). The Court has stressed that the conditions are cumulative, and thus if one of the conditions is not met an interim order cannot be made (Polish Forest, para 30). The Court will also ‘determine … whether the weighing up of interests pleads in favour of the granting of the interim measures sought or the dismissal of the application’ (para 62). Using the principle of effectiveness and the rule of law (paras 100–105), the Court has interpreted Article 279 TFEU as granting it the power to impose periodic penalty payment to ensure that the order is being complied with (para 108). There is thus no need for the Commission to start fresh infringement proceedings. The Court has cut short the procedure, which usually consists in (1) a judgment to establish a violation, (2) a judgment to determine non-compliance with the first judgment and accompanied by payment, and (3) a judgment to establish the failure to comply with the second judgment, by seemingly merging the first two steps. Interestingly, the Court also seems to state that such a penalty payment can be imposed both on the basis of a lack of compliance with a previous order and an apparent lack of intention to comply with the present order (para 112). It thus appears that the rationale for this new understanding of Article 279 TFEU is to ensure that the Member State immediately complies with the interim measures order. This case raises the spectre of the Commission increasingly starting Article 260 proceedings coupled with Article 279 TFEU to ensure early compliance with EU law.

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Effect of the Court’s ruling If the Commission’s application to the Court is successful, the Court will declare that the Member State concerned has failed to fulfil its obligations under the Treaties. As Article 260(1) TFEU provides: If the Court of Justice of the European Union finds that a Member State has failed to fulfil an obligation under the Treaties, the State shall be required to take the necessary measures to comply with the judgment of the Court. The Court will specify the act or omission giving rise to the failure. The Member State will have to infer which measures are necessary to comply with the judgment: [W]hile, in proceedings for failure to fulfil obligations under Article [258 TFEU], the Court is only required to find that a provision of [Union] law has been infringed, it is clear from Article [260(1) TFEU] that the Member State concerned is required to take the measures necessary to comply with the judgment of the Court. (Case C126/03 Commission v Germany [2004] ECR I-11197, para 26) The Court will not itself quash any national measure that it finds unlawful, but the Treaties require the Member State in question to do what is necessary to comply with the judgment. In Joined Cases 314–316/81 and 83/82 Procureur de la République v Waterkeyn [1982] ECR 4337, the Court stipulated: [I]f the Court finds in proceedings under Articles [158–159 TFEU] that a Member State’s legislation is incompatible with the obligations which it has under the Treaty the courts of that State are bound by virtue of Article [260(1)] to draw the necessary inferences from the judgment of the Court. However, it should be understood that the rights accruing to individuals derive, not from that judgment, but from the actual provisions of [EU] law having direct effect in the internal legal order. (para 16) The defaulting Member State can only be required to comply with an Article 258 judgment; the Court cannot compel the Member State to comply by means of injunction, nor can it annul a national measure declared incompatible with EU law. Thus, it is not surprising that Member States have a tendency to ignore such rulings (Case C-494/01 Commission v Ireland [2005] ECR I-3331, paras 127 and 139).

7.2.2 Financial penalties The vast majority of the cases in which infringement proceedings are brought are settled before they are referred to the Court of Justice, which suggests that the threat of court proceedings is usually enough to secure compliance. However, the 1980s saw a marked increase in the number of cases brought against Member States for failing to comply with previous rulings against them, a development that may have been attributable to the increased enthusiasm shown by the Commission between the late 1970s and the early 1990s for pursuing delinquent Member States. Furthermore, noncompliance became such a serious problem in the 1980s that the Maastricht Treaty empowered the Court to impose pecuniary sanctions against a defaulting Member State. However, the power is triggered only if the Commission brings the matter back to the Court: no sanctions may be imposed in the initial proceedings under Article 258 TFEU except under Article 260(3) (see 7.2.1). Article 260(2) TFEU provides:

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If the Commission considers that the Member State concerned has not taken the necessary measures to comply with the judgment of the Court, it may bring the case before the Court after giving that State the opportunity to submit its observations. It shall specify the amount of the lump sum or penalty payment to be paid by the Member State concerned which it considers appropriate in the circumstances. If the Court finds that the Member State concerned has not complied with its judgment it may impose a lump sum or penalty payment on it. This procedure shall be without prejudice to Article 259. According to the Commission in its Working Document on the Impact of the Lisbon Treaty on infringement proceedings (COCOM 10-08): [T]he second modification introduced by the Lisbon Treaty speeds up the system of pecuniary sanctions (lump sum and/or penalty payment) in the event a Member State fails to comply with a judgment of the Court of Justice establishing an infringement … It follows from the above that, in contrast with the previous infringement rules, the Commission has no longer the obligation to issue a reasoned opinion before the second referral to the Court of Justice. If the Commission considers that a Member State does not comply with an earlier judgment it will issue a letter of formal notice. If, after the letter of formal notice, the Commission is not yet satisfied with the measures taken it will refer the matter directly to the Court of Justice. The referral will be accompanied by a proposal for a penalty payment and/or a lump sum. This modification applies immediately, ie from 1 December 2009, including infringement proceedings pending at that time, which were opened under the old regime of Article 228 EC. Member States should also be aware of the fact that once the Commission decision on the second referral of the case to the Court of Justice is adopted the Commission will no longer withdraw the case and the Member State concerned will have to pay at least the lump sum penalising the continuation of the infringement between the judgment on noncompliance and the judgment delivered under Article 260 TFEU. Under Article 260(2) TFEU, the reference date used to assess whether there has been a failure to comply with the judgment is not that of the judgment as such but that of ‘the expiry of the period prescribed in the letter of formal notice issued under that provision’ (Case C-328/16 Commission v Greece EU:C:2018:98, para 49). Article 260(2) TFEU offers a choice between two types of pecuniary sanctions: a lump sum or a penalty payment. The basic objective of the whole infringement procedure is to secure compliance as rapidly as possible. The sanctions are not meant to compensate for the damage caused by the Member State, but to place it under pressure so as to put an end to the breach (Case C-304/02 Commission v France [2005] ECR I-6263, para 84). Often the Commission considers that a penalty payment is the most appropriate instrument for achieving this (see former Memorandum on applying Article 228 of the EC Treaty, [1996] OJ C242/6, para 4). Usually the Commission will ask for: • a lump sum if it wishes to punish past behaviour. The lump sum fulfils a dissuasive function as it is based on the assessment of the detrimental effects caused by the failure to comply with the initial judgment; or

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•

a periodic penalty payment to ensure future compliance. This sort of payment has a persuasive function as it serves to induce the Member State to put an end as soon as possible to a breach that would tend to persist (see eg Commission v Portugal (above), para 93). It is nonetheless possible that the Commission will request both a lump sum and a period penalty payment: That being so, recourse to both types of penalty provided for in Article [260(2) TFEU] is not precluded, in particular where the breach of obligations both has continued for a long period and is inclined to persist. (Commission v France (above), para 82) The Court’s ruling allowing for the imposition of both types of sanctions is now anchored in the 2011 Commission Communication – Implementation of Article 260(3) of the Treaty (2011/C 12/01), Section IV. A recent example is Case C-251/17 Commission v Italy EU:C:2018:358, in which the Court ordered Italy to pay a lump sum of €25 million and a fine of more than €30 million for every six months of delay for failure to take measures to ensure that a number of Italian cities are provided with urban waste water collecting systems and/or urban waste water treatment systems in conformity with EU law (for a similar failure to comply and penalties imposed, see Case C-328/16 Commission v Greece (above)). However, as the Treaty does not cover the method of calculation of those sanctions, the Commission established clear criteria in successive Communications, the first one being the 2005 Commission Communication (SEC(2005) 1658) that took notice of the guidance provided by the Court in Case C-387/97 Commission v Greece [2000] ECR I5047: The basic criteria which must be taken into account in order to ensure that penalty payments have coercive force and [EU] law is applied uniformly and effectively are, in principle, the duration of the infringement, its degree of seriousness and the ability of the Member State to pay. In applying those criteria, regard should be had in particular to the effects of failure to comply on private and public interests and to the urgency of getting the Member State concerned to fulfil its obligations. (para 92) The current methods of calculation of the penalties and lump sum payments are set out in the 2011 Communication, which must be read in conjunction with the 2005 Communication. Moreover, as stipulated in para 23 of the 2011 Communication, these methods of calculation also apply in cases relating to Article 260(3) (see 7.2.1). In setting the penalty, three fundamental criteria are taken into account (para 13): (a) the seriousness of the infringement. This is measured in reference to the provision breached, the effects of infringements on general or particular interests, the actions taken by the States to comply at least partially with the judgment, etc (2005 Communication, para 16); (b) its duration; (c) the need to ensure that the sanction itself is a deterrent to further infringements. Although these guidelines are not binding on the Court (Case C-328/16 Commission v Greece (above), para 91), it has reiterated these three criteria (Case C-205/17 Commission v Spain EU:C:2018:606, para 26) and followed them closely. For example, in Case C-388/16 Commission v Spain (above), Spain was asked to pay €3 million. The Court took into account the fact that 29 months had passed between the judgment and

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the entry into force of a national law complying with the judgment ((b) duration), and that Spain’s actions had adversely affected freedom of establishment, one of the fundamental principles of the internal market ((a) seriousness of the infringement) (see 15.3). The Court also insisted on establishing which degree of persuasion was needed for the State to alter its conduct and comply with the law (see eg Case C-557/14 Commission v Portugal EU:C:2016:471, para 67; Case C-328/16 Commission v Greece (above), para 89) ((c) deterrence). After all, a purely symbolic payment would render the exercise useless (2011 Communication, para 15). In some specific cases, Member States’ good progress after having been ordered to pay is also taken into consideration as it is possible to ‘reduce the penalty payment in accordance with the process made in complying with the judgment’, ie to impose a sliding-scale periodic penalty payment (Case C-328/16 Commission v Greece (above), paras 102–105). When the Court applies these criteria, it assesses the effects the failure to comply has on public and private interests as well as how urgent it is for the State concerned to be induced to fulfil its obligations (Case C-387/97 Commission v Greece EU:C:2000:356, para 92). It should be stressed that the Court uses the same elements to determine the penalties under Article 260(3) TFEU (High-speed Networks, para 84). Further, the sanctions proposed by the Commission must be foreseeable and respect the principles of proportionality, equal treatment and transparency (2011 Communication, para 14). As the Court has explained, they contribute to ensuring that the Commission’s actions are ‘transparent, foreseeable and consistent with legal certainty’ (Case C-304/02 Commission v France (above), para 85); they are a tool to ensuring that these principles are respected (Case C-328/16 Commission v Greece (above), para 91). The calculations of penalty payments are regulated in Section III of the 2005 Communication. In addition to the above-mentioned criteria, they take into account the capacity of the Member State to pay and the number of votes it has in the Council (2005 Communication, paras 18 and 14 respectively). The Court thus, for years, calculated financial penalties on the basis of a State’s GDP and the number of its votes in the Council (see eg Case C-387/97 Commission v Greece EU:C:2000:356, para 88). However, since the old system of weighted votes ceased to apply on 1 April 2017, the Court dismissed it as a relevant factor, asserting that ‘the GDP of the Member State is to be the predominant factor’ (Case C-93/17 Commission v Greece EU:C:2018:903, para 142). Consequently, a State’s capacity to pay is often viewed as the third criterion (besides the seriousness of the violation and the duration of the violation) to calculate the penalty payment. Particular attention was, for example, paid to Greece’s situation whose GDP had decreased by 25.5% between the year when the formal letter of notice was sent and the year when Greece lodged its defence before the Court (Case C-328/16 Commission v Greece (above)). The lump sum, on the other hand, is calculated by using the method set out in paras 19–24 of the 2005 Communication. It must be noted that the day from which the period to be taken into account when calculating the lump starts running is, under Article 258, the day after the first judgment (2005 Communication, para 22) and, under Article 260(3), the day after the time limit for the transposition of the directive (2011 Communication, para 28). The macro-economic data used to calculate lump sum and penalty payments are constantly being revised. The latest update is dated 13 September 2019 ([2019] OJ C309/1). The Commission may calculate the penalty, but the suggestions do not bind the Court; they merely constitute a useful point of reference. Ultimately, the decision

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belongs with the Court, as it stated in Case C-278/01 Commission v Spain [2003] ECR I-14141: In that connection it must be pointed out that the Commission’s suggestions cannot bind the Court and merely constitute a useful point of reference. In exercising its discretion, it is for the Court to fix the lump sum or penalty payment that is appropriate to the circumstances and proportionate both to the breach that has been found and to the ability to pay of the Member State concerned. (para 41) In contrast, Article 260(3) TFEU provides that [i]f the Court finds that there is an infringement it may impose a lump sum or penalty payment on the Member State concerned not exceeding the amount specified by the Commission. The payment obligation shall take effect on the date set by the Court in its judgment. It is in fact the combination of the powers of the Commission and the Court that makes this procedure an effective tool to ensure that EU law is enforced in all Member States. See Figure 7.2.

,QLWLDWLRQ Complaint or monitoring

Investigation by Commission

$GPLQLVWUDWLYH3KDVH Informal Stage Inquiries ʊ answer of the State

Formal Stage Formal letter ʊ observations ʊ reasoned opinion

-XGLFLDO3KDVH Court Action by Commission Defences Ruling under Article 260(1) TFEU

Figure 7.2

Commission starts fresh proceedings and asks for pecuniary sanctions (lump sum and/or penalty payment) Commission suggests sanctions ʊ Court ruling under Article 260(2) TFEU

Enforcement procedure under Articles 258 to 260 TFEU

se

ca ple The Commission claimed that the Portuguese transposition of Directive 89/665/EEC on the m exa coordination of the laws, regulations and administrative provisions relating to the application of review procedures to the award of public supply and public works contracts, was incorrect and incomplete. Following an exchange of information, the Commission, dissatisfied with Portugal’s reply on 26 July 1995, sent a formal letter of notice on 8 September 1995, asking Portugal to transpose the directive correctly and fully. On 7 July 1997 the Commission then issued a reasoned opinion, and on 9 February 2001 it sent a complementary reasoned opinion in the light of discussions with Portugal. The Commission referred to two specific breaches: (a) the domestic act did not cover all relevant activities mentioned in the Directive, and (b) Decree-Law No 48 051 that limited compensation possibilities had not yet been repealed. As Portugal did not abide by the deadline set in the reasoned opinion, the Commission seized the Court, which issued a judgment on 14 October 2004 (Case C-275/03 Commission v Portugal EU:C:2004:632) demanding that Portugal repeal Decree-Law No 48 051. The defences that the law was not applied by the judges, that Portugal was facing some internal challenges and that some legislative changes had been made after the expiry of the deadline were dismissed by the Court.

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By letter of 4 November 2004, the Commission requested Portugal to inform it of the measures adopted to comply with the judgment. Replying on 19 November 2004, Portugal explained that a change of government had delayed the bill repealing Decree-Law No 48 051, a defence the Commission did not accept in its formal letter of notice on 21 March 2005. The Commission further explained that the draft law did not comply with Directive 89/665. A reasoned opinion (NB: since the Lisbon Treaty a reasoned opinion is no longer required) was issued on 13 July 2005 following an unsatisfactory reply by Portugal, reminding Portugal to fulfil its obligations under Article [260(1) TFEU]. Portugal informed the Commission on 12 December 2005 that it was in the process of repealing Decree-Law No 48 051. On 7 February 2006, as Portugal had not complied with the ruling, the Commission started fresh proceedings seeking the imposition of a penalty payment. The Court, satisfied that Decree-Law No 48 051 had not been repealed and that there were no acceptable defences, ruled that Portugal had failed to fulfil its obligations (Case C70/06 Commission v Portugal [2008] ECR I-1). The Commission proposed a penalty payment of €21,450 per day of delay. Whilst the Court agreed that a penalty was a means to be adopted to induce Portugal to repeal Decree-Law No 48 051, its application of the criteria of seriousness of the breach, duration of the infringement and Member State’s ability to pay differed, to the effect that Portugal was asked to pay a penalty payment of €19,392 per day from the date of delivery of the judgment, ie 10 January 2008. In the meantime Portugal adopted a law that repealed Decree-Law No 48 051 and established a new system of compensation. The Commission, however, felt the new system to be lacking in the light of the Directive, and thus as not compliant with the 2004 judgment. A second Portuguese law was passed. Consequently the Commission sought payment by Portugal for the period from 10 January to 17 July 2008 (date when the second law was adopted). Portugal challenged the decision of the Commission determining the amount to be paid, on the basis that the Court ruling had only asked that Decree-Law No 48 051 be repealed, and that had been done as of 30 January 2008 when the first law entered into force. The Court reminded the Commission that it was not entitled to decide whether the law complied with the Directive, only whether Decree-Law No 48 051 had been repealed in accordance with the Court judgment (Case T-33/09 Portugal v Commission [2011] ECR II-1429). If the Commission was of the opinion that the system in place was not in conformity with the Directive, the Commission should have initiated fresh infringement proceedings. After all, according to the system established under Articles 258–260 TFEU, only the Court of Justice can appraise whether a State has complied with its duties. The Commission then sought to have set aside the judgment of the General Court. The Court of Justice dismissed the appeal (Case C-292/11 P Commission v Portugal EU:C:2014:3).

7.3 Member State liability for breaches of EU law Most EU rules are enforced through national legal systems. Thus it appears normal that individuals who are granted rights by virtue of EU law also use the national court system to obtain compensation for violation of such rights. Whilst the principle of supremacy (see 6.2) and the principle of direct effect (see 6.3) ensure that individuals can assert their rights in domestic courts, there was initially no right to seek and receive compensation.

7.3.1 Background to and rationale of the principle The principle of Member State liability was established in the Francovich case (Joined Cases C-6 and 9/90 Francovich and Others v Italy [1991] ECR I-5357). The principle holds that Members States can be found liable for damages suffered by individuals as a result of the Member States’ failure to comply with EU law. The objective of the Court was to try to make EU law more effective. Whilst State liability was originally used as a remedy to a State’s lack of transposition of directive, it is in fact increasingly used in situations where an interpretation of

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national law in light of EU law is not possible (see 6.2.3.2) (see eg Case C-91/92 Faccini Dori v Recreb Srl [1994] ECR I-3325, para 27).

se

ca ple In Joined Cases C-6 and 9/90 Francovich and Others v Italy [1991] ECR I-5357, Italy had m exa failed to implement a directive designed to protect employees in the event of their employer’s insolvency. Francovich had been employed by an Italian company but had received hardly any wages. Having brought proceedings against his employer, the latter had gone insolvent. For that reason Francovich brought a separate action against the Italian State to cover his losses. In the course of these second proceedings, the national court asked the ECJ whether the State itself would be obliged to cover the losses of the employees. Based on the principles of supremacy and direct effect, the Court explained: It should be borne in mind at the outset that the Treaty of Rome as amended had created its own legal system, which is integrated into the legal systems of the Member States and which their courts are bound to apply. The subjects of that legal system are not only the Member States but also their nationals. Just as it imposes burdens on individuals, [EU] law is also intended to give rise to rights, which become part of their legal patrimony. Those rights arise not only where they are expressly granted by the Treaty but also by virtue of obligations which the Treaty imposes in a clearly defined manner both on individuals and on the Member States and the [EU] institutions (see the judgments in Case 26/62 NV Algemene Transport- en Expeditie Onderneming van Gend & Loos v Netherlands Inland Revenue Administration [1963] ECR 1 and Case 6/64 Costa v ENEL [1964] ECR 585). (paras 31 and 32) Thus, the Court wished to give individuals a means to seek redress: The full effectiveness of [EU] rules would be impaired and the protection of the rights, which they grant, would be weakened if individuals were unable to obtain redress when their rights are infringed by a breach of [EU] law for which a Member State can be held responsible. The possibility of obtaining redress from the Member State is particularly indispensable where, as in this case, the full effectiveness of [EU] rules is subject to prior action on the part of the State and where, consequently, in the absence of such action, individuals cannot enforce before the national courts the rights conferred upon them by [EU] law. It follows that the principle whereby a State must be liable for loss and damage caused to individuals as a result of breaches of [EU] law for which the State can be held responsible is inherent in the system of the Treaty. (paras 33–35)

The Court set out the three criteria for Member State liability in Francovich: The first of those conditions is that the result prescribed by the [EU provision] should entail the grant of rights to individuals. The second condition is that it should be possible to identify the content of those rights on the basis of the provisions of the directive. Finally, the third condition is the existence of a causal link between the breach of the State’s obligation and the loss and damage suffered by the injured parties. (para 40, emphasis added)

7.3.2 Author of the violation: definition of a State The author of the violation of an EU obligation must be the Member State. Yet the definition of a State encompasses ‘whatever be the organ of the State whose act or omission was responsible for the breach’ (Joined Cases C-46 and 48/93 Brasserie du Pêcheur SA v Germany and R v Secretary of State for Transport, ex parte Factortame Ltd and Others [1996] ECR I-1029, para 32). In Case C-224/01 Köbler [2003] ECR I-10239, the Court explained that the international law principle by which a State incurs liability

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irrespective of whether the breach is attributable to the legislature, the judiciary or the executive also applies in the EU legal order all the more as all State authorities are bound to comply with EU law (para 32). This means that the following organs of the State can be held to be in breach of EU law and, if the criteria set out in the Factortame case (see below 7.3.3) are fulfilled, individuals can seek damages against the State: (a) national legislatures (Factortame); (b) national executives (Case C-5/94 R v Ministry of Agriculture, Fisheries & Food, ex parte Hedley Lomas (Ireland) Ltd [1996] ECR I-2553); (c) national Supreme Courts (Köbler). This only applies to courts adjudicating at last instance since their decisions are final (para 32; see also Case C-168/15 Tomášová v Slovenská republika – Ministerstvo spravodlivosti SR and Pohotovosť s.r.o. EU:C:2016:602, para 36). Although such liability ‘is governed by the same conditions’ (Tomášová, para 23), the Court specified that, with regard to the second condition (see 7.3.3), State liability would only arise ‘in the exceptional case where the court has manifestly infringed the applicable law’ (Case C-173/03 Traghetti del Mediterraneo SpA v Italy ([2006] ECR I-5177, para 32) and ‘where that infringement takes place despite the existence of well-established Court caselaw on the matter’ (Tomášová, para 36). It should be noted that the principle of res judicata is not deemed to be an impediment to the principle of State liability (Köbler, para 40; Case C-620/17 Hochtief Solutions AG Magyarországi Fióktelepe v Fővárosi Törvényszék EU:C:2019:630, para 39); (d) regional authorities (Case C-302/97 Konle v Austria [1999] ECR I-3099); (e) autonomous public law bodies (Case C-424/97 Haim v Kassenzahnärztliche Vereinigung Nordrhein [2000] ECR I-5123); (f) State officials (Case C-470/03 AGM-COS MET Srl v Suomen valtio and Lehtinen [2007] ECR I-2749).

7.3.3 Development of the principle The original criteria set out in the Francovich case were later refined in the Factortame case: In such circumstances, [EU] law confers a right to reparation where three conditions are met: the rule of law infringed must be intended to confer rights on individuals; the breach must be sufficiently serious; and there must be a direct causal link between the breach of the obligation resting on the State and the damage sustained by the injured parties. (para 51) The criterion of the intention to confer rights on individuals is usually fulfilled when the provision is directly effective (Factortame). Yet non-directly effective provisions can also confer rights on individuals (Francovich and Case C-91/92, Faccini Dori v Recreb Srl [1994] ECR I-3325). However, not every provision of EU law will be covered (Case C-72/95 Aannemersbedrijf PK Kraaijeveld BV v eav Gedeputeerde Staten van ZuidHolland [1996] ECR I-5403 and Case C-443/98 Unilever Italia SpA v Central Foods SpA [2000] ECR I-7535). The second criterion requires the breach of EU law to be sufficiently serious. The test is ‘whether the Member State or the [EU] institution concerned manifestly and gravely disregarded the limits on its discretion’ (Factortame, para 55, emphasis added). In order to determine whether a Member State has indeed manifestly and gravely disregarded the limits on its discretion, the following factors, amongst others, are taken into account (see Hochtief Solutions AG, 7.3.2 above, para 42 for the latest iteration):

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(a) the clarity and precision of the EU rule breached (Case C-392/93 R v HM Treasury, ex parte British Telecommunications plc [1996] ECR I-1631 and Joined Cases C-283, 291 and 292/94 Denkavit International BV, VITIC Amsterdam BV and Voormeer BV v Bundesamt für Finanzen [1996] ECR I-5063); (b) the measure of discretion left by that rule to the national or EU authorities (Hedley Lomas and Joined Cases C-178–179 and 188–190/94 Dillenkofer, Erdmann, Schulte, Heuer, Werner and Knor v Germany [1996] ECR I-4845). A more modern version of this factor reads as follows: ‘the scope of the room for assessment that the infringed rule confers on national authorities’ (Hochtief Solutions AG, para 42); (c) whether the infringement and the damage caused were intentional or involuntary (Dillenkofer, para 28); (d) whether any error of law was excusable or inexcusable (Factortame, para 56); (e) the fact that the position taken by an EU institution might have contributed towards the omission, and the adoption or retention of national measures or practices contrary to EU law (Factortame, para 56). In the latest cases, this factor reads as follows: ‘the fact that the position taken by an EU institution might have contributed towards the omission, adoption or maintenance of national measures or practices contrary to EU law (Case C-571/16 Kantarev v Balgarska Narodna Banka EU:C:2018:807, para 105; Case C-318/13 X EU:C:2014:2133, para 42) or ‘the fact that the position taken by an EU institution might have contributed to the adoption or maintenance of national measures or practices contrary to EU law’ (Tomášová, 7.3.2 above, para 25; Hochtief Solutions AG, para 42). In Köbler (7.3.2 above) and Traghetti (7.3.2 above), the Court had in simpler terms referred to ‘the position taken, where applicable, by [an EU] institution’ (paras 55 and 32 respectively) without thus specifying the type of action taken by the institution; (f) the failure by a national court to make a reference for a preliminary ruling under Article 267 TFEU (Hochtief Solutions AG, para 42). In other words, the less discretion the Member State has, the greater its liability (Haim, para 38). The last criterion is the proof of a causal link between the alleged breach and the damage incurred by the individual. In this regard it must be noted that this determination is left in the hands of the national courts: As for the third condition, it is for the national courts to determine whether there is a direct causal link between the breach of the obligation borne by the State and the damage sustained by the injured parties. (Factortame, para 65)

7.3.4 Procedural autonomy and domestic responsibilities In principle, national courts apply the above-mentioned criteria for Member State liability (Case C-446/04 Test Claimants in the FII Group Litigation v Commissioners of Inland Revenue [2006] ECR I-11753, para 210), as this ensures some autonomy of the national courts whilst asserting their role as enforcers of EU law (see further 9.1). However, in some instances, the Court can provide national courts with guidelines and indications, thereby assisting them in applying the criteria (see eg X, 7.3.3 above, para 51). Also, when the Court of Justice believes it has sufficient information, it may proceed to determine whether the conditions for Member State liability are satisfied (see eg Ex parte British Telecommunications (7.3.3 above) and Case C-429/09 Fuß v Stadt Halle [2010] ECR I-12167). It can be particularly difficult for a national court to

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determine whether there is a sufficiently serious breach based on a variety of factors to be applied to a specific set of circumstances. It must be borne in mind, though, that the Court has always stressed, as in Case 33/ 76 Rewe-Zentralfinanz eG et Rewe-Zentral AG v Landwirtschaftskammer für das Saarland [1976] ECR 1989, that [i]t is for the domestic legal system of each member state to designate the courts having jurisdiction and to determine the procedural conditions governing actions at law intended to ensure the protection of the rights which citizens have from the direct effects of [Union] law … (para 5) Despite being given clear autonomy, the domestic courts must abide by the principles of equivalence and effectiveness, ie the conditions for reparation ‘must not be less favourable than those relating to similar domestic claims and must not be so framed as to make it virtually impossible or excessively difficult to obtain reparation’ (Francovich, para 43; see also Case C-161/15 Bensada Benallal v Belgium EU:C:2016:175, para 24). It should be noted that such principles apply not only in relation to State liability but also, more generally, by virtue of the principle of sincere cooperation, to all procedural rules governing actions for safeguarding an individual’s rights under EU law (Rewe-Zentralfinanz and Rewe-Zentral, para 5; Case C-234/17 XC and Others v Generalprokuratur EU:C:2018:853, para 22). The equivalence principle requests national courts to extend existing national remedies to similar actions based on EU law. For example, in Transportes Urbanos (Case C-118/08 Transportes Urbanos y Servicios Generales SAL v Administración del Estado [2010] ECR I-635), the ECJ found that the requirement of exhaustion of domestic remedies before bringing a State liability claim for breach of EU law violated the principle of equivalence. In contrast the effectiveness principle demands that these national remedies must not make the enforcement of EU law excessively difficult. In determining whether this is the case, the Court will examine ‘the role of that provision in the procedure, its progress and its special features, viewed as a whole, before the various national instances’ (Case C-3/16 Aquino v Belgium EU:C:2017:209, para 53). For example, in Hochtief Solutions AG, the Court explained that a national rule that excludes from the compensation payment the costs incurred by a party as a result of a court decision’s that violated EU law may make it difficult, it not impossible, to obtain adequate compensation (7.3.2 above, para 47). Further, national law cannot require the setting aside of a decision given by a court when such setting aside is, in practice, impossible (Case C-160/14 Ferreira da Silva e Brito and Others v Portugal EU:C:2015:565, para 60). The Court has held that whilst EU law does not rule out Member State liability in conditions that are less restrictive than those provided for in EU law, it precludes the imposition of any additional conditions (Fuß, para 66). To determine whether a breach is sufficiently serious, an individual should not, for example, have to show also that the relevant authorities intended to cause the harm (Kantarev, 7.3.3 above, para 126). When determining the type and amount of reparation to be granted to the individual who suffered from the failure of the Member State to apply EU law, the national court uses the relevant domestic law (Francovich). However, the Court has indicated that the reparation ‘must be commensurate with the loss or damage sustained’ (Factortame, para 82). Further, the Court has specified that the amount claimed must be actual, certain and concrete (Case 138/79 SA Roquette Frères v Council [1980] ECR 3333), and there is no compensation for anticipated profits.

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Moreover, injured parties are expected to show reasonable diligence in limiting the extent of the loss or damage (mitigation) or risk having to bear the loss or damage themselves (Joined Cases C-104/89 and C-37/90 Mulder and Others and Heinemann v Council and Commission [1992] ECR I-3061, para 33). Likewise, the Court allows for national courts to question whether the applicant ‘availed himself in time of all the remedies available to him’ (Kantarev, para 140). This includes requiring from the injured party to seek prior annulment of a measure, though only if such annulment is, in practice, possible (Kantarev, para 143). Moreover, this duty does not go so far as to oblige an individual to request compliance with a directly effective provision of EU law as a precondition for obtaining compensation as this would breach the principle of effectiveness (Fuß, para 78). Whilst the principle of State liability makes EU law more effective, its application in EU Member States varies considerably. After all it is a remedy offered under national law. Moreover, given the choice between asking for the application of the principles of supremacy and direct effect of EU law and compensation for violation of EU law, individuals tend to favour the former.

7.4 Further reading Albors-Llorens A, ‘Remedies against the EU Institutions after Lisbon: An Era of Opportunity?’ (2012) 71 Cambridge Law Journal 507. Beutler B, ‘State Liability for Breaches of Community Law by National Courts: Is the Requirement of a Manifest Infringement of the Applicable Law an Insurmountable Obstacle?’ (2009) 46 CML Rev 773. Breuer M, ‘State Liability for Judicial Wrongs and Community Law: The Case of Gerhard Köbler v Austria’ (2004) 29 EL Rev 243. Brian J, ‘Article 260(2) TFEU: An Effective Judicial Procedure for the Enforcement of Judgements?’ (2013) 19 European Law Journal 404. Lock T, ‘Is Private Enforcement of EU Law through State Liability a Myth? An Assessment 20 Years after Francovich’ (2012) 49 CML Rev 1675. Pavlovic V, ‘Some Observations on the European Court of Justice’s Post-Francovich Jurisprudence’ (2009) 4 Croatian Yearbook of European Law and Policy 179. Peers S, ‘Sanctions for Infringement of EU Law after the Treaty of Lisbon’ (2012) 18 European Public Law 33. Prete L and Smulders B, ‘The Coming of Age of Infringement Proceedings’ (2010) 47 CML Rev 9. Smith M, ‘Inter-institutional Dialogue and the Establishment of Enforcement Norms: A Decade of Financial Penalties under Article 228 EC (now Article 260 TFEU)’ (2010) 16 European Public Law 547. Steunenberg B, ‘Is Big Brother Watching? Commission Oversight of the National Implementation of EU Directives’ (2010) 11 European Union Politics 359. Varga Z, ‘National Remedies in the Case of Violation of EU Law by Member State Courts’ (2017) 54 CML Rev 51. Wennerås P, ‘Making Effective Use of Article 260 TFEU’ in Jakab A and Kochenov D (eds), The Enforcement of EU Law and Values: Ensuring Member States’ Compliance (OUP, 2017) 79. Wennerås P, ‘Saving a Forest and the Rule of Law: Commission v. Poland’ (2019) 56 CML Rev 541.

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Zingales N, ‘Member State Liability vs. National Procedural Autonomy: What Rules for Judicial Breach of EU Law?’ (2010) 11 German Law Journal 419. Summary

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The EU has no harmonised remedies or procedural rules to ensure the enforcement of its norms. The two main remedies are the Article 258 TFEU enforcement procedure, which can only be initiated by the Commission, and the application of the concept of Member State liability that has been created and developed by the Court of Justice. This clearly shows that the main guardians of EU law are the Commission and the CJEU, assisted by the national courts.

Test Your Knowledge

ur t yo dge s e t wle kno

1

In 2018 the Council of Ministers issued a Directive laying down minimum standards for the manufacture of door locks, to try to reduce the amount of burglary in the EU. The Directive was due to be implemented by April 2019. However, in response to lobbying from lock manufacturers based in Italy, the Italian Government failed to implement it. Instead, it issued informal guidance to lock manufacturers, recommending them to take the EU Directive into account when designing locks. Lock Your Door, a German company manufacturing door locks, argues that it has been adversely affected by the lack of implementation of the Directive. Indeed, manufacturing locks according to the Directive (which has been correctly implemented in Germany) is more costly, and thus the sale price of locks is higher than that of locks produced in Italy. Lock Your Door has alerted the European Commission that the Italian Government has failed to implement the Directive. After informal discussion with Italy, the Commission has now issued a reasoned opinion, warning Italy that it will face legal proceedings if it does not implement the Directive. Italy has made the following points in response: (a) The informal guidance it has issued is sufficient to comply with its obligation to implement the Directive. (b) The Directive is invalid because it had been adopted using the wrong voting procedure. (c) Spain has also failed to implement the Directive, but no proceedings have been taken against Spain. (d) As soon as most Italy-based lock manufacturers have changed their designs, an Italian law complying with the Directive will be introduced. After briefly explaining at which stage of the procedure we are, advise the Commission as to the validity of Italy’s arguments and how it may proceed against Italy. What will happen if Italy refuses to implement the Directive?

2

Cryptonia (a fictional Member State) has failed to implement a Directive that has now passed the date for transposition. As a result, Carbon-Co, a leading consultancy firm on environmental matters in Cryptonia, has suffered major losses and expects to be forced into liquidation within six months. Cryptonia, a federal State, has relied on its regional assemblies to implement the Directive but, whilst some have done so, others have not. Meanwhile, it has come to Carbon-Co’s attention that the Council, when adopting the Directive, not only failed to follow the correct voting procedure but also ignored advice that the measure breached the right to property, a fundamental right protected by the general principles of EU law. Advise Carbon-Co.

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III

PART III

THE EUROPEAN JUDICIARY 8 The Court of Justice of the European Union

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9 Preliminary Ruling Procedure on Interpretation and Validity

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10 Judicial Supervision of European Union Institutions

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The Court of Justice of the European Union

After reading this chapter, you will be able to understand: • • • • •

the structure of the Court of Justice of the European Union (CJEU) the workings and role of the CJEU the methods of interpretation used by the CJEU to develop and clarify EU law the so-called judicial activism of the CJEU the constitutional role played by the CJEU.

8.1 Introduction In the first decades of the European Communities (EC), only one court, the European Court of Justice (ECJ), handled cases relating to EC law. Gradually the ECJ became clogged up with cases. This was not so much the result of the expansion of the Court, the number of judges increasing at every stage of the enlargement of the then EC alongside deepening European integration. Rather, this evolution quite naturally led to more litigation. It was therefore agreed in 1986, under the Single European Act, to set up a Court of First Instance (CFI) to deal with the bulk of the cases, such as complaints by EU staff, with a right of appeal on points of law to the ECJ. Gradually the jurisdiction of the CFI was extended in an effort to keep pace with the growing number of cases. But there remained a problem of overload, and thus a further layer of courts, called judicial panels, was set up to deal with minor cases. The first of these, the Civil Service Tribunal, was established to deal with staff cases. The CFI heard more and more matters that used to fall within the jurisdiction of the ECJ, leaving the latter to concentrate on the really important cases. In effect there is now a whole hierarchy of courts, just as there is in Member States. in practice The CJEU should never be confused with the European Court of Human Rights, which sits in Strasbourg and deals with States both within and outside the EU. The European Court of Human Rights is completely separate and does not have jurisdiction to adjudicate EU law. It is the judicial body of the European Convention on Human Rights, and examines cases relating to the protection of human rights and fundamental freedoms in the Member States of the Council of Europe, an international organisation separate from the EU (see 1.2 above).

The Lisbon Treaty reorganised the court system. The CJEU now consists of the Court of Justice (former ECJ – 8.2 below), the General Court (former CFI – 8.3 below) and specialised courts (Article 19(1) TEU – 8.4 below), and it has, under Article 19(1) TEU, the duty to ‘ensure that in the interpretation and application of the Treaties the law is

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observed’. In this regard, Article 19(1) TEU ‘gives concrete expression to the value of the rule of law stated in Article 2 TEU’ (Case C-46/16 Associação Sindical dos Juízes Portugueses v Tribunal de Contas EU:C:2018:117, para 32). The CJEU certainly is one of the strongest indicators of the supranational nature of the EU (see eg Opinion 2/13 [Accession of the European Union to the European Convention for the Protection of Human Rights and Fundamental Freedom] EU:C:2014:2454), and it has been described as one of the most Union-minded and most independent from national interests of all the EU’s institutions. Furthermore, it has driven the Union towards further integration through its interpretation of the Treaties and secondary legislation (often referred to as judicial activism). The legal provisions relating to the CJEU are Articles 19 TEU and Articles 251–281 TFEU, Protocol No 3 on the Statute of the Court of Justice of the European Union (the Statute of the Court) and the Rules of Procedure (of the Court of Justice ([2012] OJ L265) and of the General Court ([2015] OJ L105/1) respectively).

8.2 The Court of Justice The Court of Justice consists of 27 judges, one for each Member State, appointed by common accord of the Member States (though in practice each State appoints its own judge and the other States accept them) after consultation of a panel responsible for giving an opinion on prospective candidates’ suitability to perform the duties concerned. The judges serve for a renewable six-year term, with half retiring every three years to preserve continuity (Article 253 TFEU). They, in turn, elect their President and Vice-President from among themselves. Judges are individuals whose independence is beyond doubt, and are either qualified for the highest judicial office in their own State or are jurisconsults (academic lawyers) of recognised competence (Article 253 TFEU). Article 251 TFEU specifies that ‘[t]he Court of Justice shall sit in chambers or in a Grand Chamber’, but exceptionally it ‘may also sit as a full Court’, which means that the Court may sit either as a full court in a Grand Chamber of 15 judges or in smaller chambers of three or five judges. According to the Statute of the Court (Protocol No 3 on the Statute of the Court of Justice of the European Union ([2015] OJ L 341/14) with amendments), a full Court is required in the following situations: to waive the immunity of judges (Article 3 of the Statute) and to deal with cases brought under Articles 228(2), 245(2), 247 and 286(6) TFEU (Article 16 of the Statute). The Court may also decide to refer the case to the full Court if it is of exceptional importance such as, for instance, on the interpretation of Article 50 TEU in Case C-621/18 Wightman and Others v Secretary of State for Exiting the European Union EU:C:2018:999 (Article 16 of the Statute). The Grand Chamber, on the other hand, sits ‘when a Member State or an institution of the Union that is party to the proceedings so requests’ (Article 16 of the Statute). The Court of Justice is currently assisted by 11 Advocates General (AGs), who must have the same qualifications as the judges (a former judge at the General Court (see 8.3 below) might be appointed as an Advocate General – see eg AG Nils Wahl who was a judge at the General Court from 7 October 2006 to 28 November 2012 before being appointed Advocate General at the Court of Justice). They are appointed by common accord (Article 252 TFEU), which means that in practice the larger Member States expect to have one Advocate General and the smaller Member States take turns. By virtue of Article 253 TFEU, their job is to act with complete impartiality and

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independence to make in open court reasoned submissions in order to assist the Court. This idea derives from the French Conseil d’Etat, where a person called the Commissaire du Gouvernement addresses the court on behalf of the public interest. In contrast to most domestic legal systems where the highest court has before it the judgments of one or two lower courts and can ask itself whether they were right or wrong, the Court of Justice rarely has this privilege. Moreover, the Court has several roles (see 8.2.1 below). To facilitate the task of the judges (see Case C-17/98 Emesa Sugar (Free Zone) NV v Aruba [2000] ECR I-667, para 13), Advocates General present their views after the judges have heard the arguments of the parties. The Advocate General’s intervention is viewed as an ‘individual reasoned opinion, expressed in open court, of a Member of the Court of Justice itself ’ rather than an ‘opinion addressed to the judges or to the parties which stems from an authority outside the Court’ (Emesa Sugar, para 14). Advocates General are independent advisers to the Court, who produce an ‘opinion’ or a ‘view’ (in the case of an opinion of the Court pursuant to Article 218(11) TFEU (eg, Opinion 1/13 EU:C:2014:2303) or an urgent preliminary ruling (eg, Case C-129/14 PPU Criminal proceedings against Spasic EU:C:2014:586)) that is not legally binding on the Court yet helps the Court reach its judgment. The Court, which sits in Luxembourg, is administered by a registrar and staff who manage the Court’s departments under the authority of the President. Each judge and Advocate General is free to appoint and employ up to four legal secretaries, also known as référendaires. These are legally trained persons who assist the judge or the Advocate General with research and drafting.

8.2.1 The aims and roles of the Court of Justice There are three central objectives that the Court of Justice strives to achieve: (a) to ensure that in application and interpretation the law is observed; (b) to provide a forum for resolving disputes between institutions, Member States and individuals; (c) to protect individual rights. The Court has several roles and acts as: (a) a constitutional court, considering the powers of the institutions, bodies, agencies and offices, and of the Member States and/or the relations between them (see further Chapter 2); (b) an administrative court, providing judicial review of acts of the EU institutions (see further 10.2); (c) an appeal court, dealing with points of law in appeals against judgments or orders of the General Court under Article 256(1)(sub 2) TFEU. However, with regard to appeals brought against a decision of the General Court concerning a decision of an independent board of appeal of the EU Intellectual Property Office, the Community Plant Variety Office, the European Chemicals Agency and the EU Aviation Safety Agency, from 1 May 2019, the Court only hears them if they raise issues that are significant with respect to the unity, consistency or development of EU law. (Amendments of the Rules of Procedure of the Court of Justice [2019] OJ L111/73 modifying Article 58a of the Statute of the CJEU); (d) an advisory court, providing preliminary rulings on an interpretation of EU law upon request by a national court (Article 267 TFEU) (see further Chapter 9) and, when requested by a Member State, the Council, the Commission or the

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European Parliament, also providing an Opinion as to whether an agreement envisaged by the EU is compatible with the Treaties (Article 218(11) TFEU – see 8.2.2.2 below); (e) a fining body, that is, in certain circumstances, the Court can impose fines (see further 7.2.2) or review fines imposed by the General Court in competition law cases. The Court of Justice has jurisdiction in cases against Member States of the EU or the institutions of the EU in seven circumstances: (a) Article 267 references from national courts for a preliminary ruling on an interpretation of European Union law (see further Chapter 9); (b) Articles 258 and 259 actions against Member States for failing to implement Treaty obligations (see further 7.2); (c) Article 263 actions against an institution for abuse of power brought by privileged and non-privileged applicants. The Court of Justice has sole jurisdiction over proceedings brought by Member States against the Council (with the exception of measures on State aid, dumping and implementing powers) and/or the European Parliament, and over actions brought by one EU institution against another (see further 10.2); (d) Article 265 proceedings instituted by privileged applicants against an institution for failing to act (see further 10.3); (e) appeals on points of law from the General Court (Article 256(1)(sub 2) TFEU); (f) disputes brought by a Member State against another State by way of a special agreement between the parties under Article 273 TFEU. The only case so far is Case C-648/15 Austria v Germany EU:C:2017:664. See further Figure 8.1.

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Proceedings

Judgments

Preliminary rulings

Opinions

Direct actions

Interpretation of Union Treaties and acts Validity of Union acts

Jurisdiction by operation of law Against the Union

Jurisdiction by agreement

Against Member States

Annulment actions

By Commission

Failure to act

By Member States

Appeals From GC under 256(1) (sub 2) From GC regarding staff cases

Contractual and Noncontractual liability Appeals against penalties

Figure 8.1 Jurisdiction of the Court of Justice

8.2.2 The procedure 8.2.2.1

Judicial proceedings The procedure in the Court of Justice is very much based on the Continental model, with the bulk of the proceedings being written, not oral. The procedure is governed by Protocol No 3 on the Statute of the Court of Justice of the European Union. As the Court is multilingual, there have to be rules to govern which language is used in any particular case. If a natural or legal person sues an EU institution, the applicant can choose which of the official languages is used. If the action is against a Member State, it is that State’s language that will be used. If the case is on reference from the court of a Member State, again it will be that court’s language that is used. All official proceedings will take place in that language, all documents will be translated into that language and the version of the judgment in that language will be the authoritative one. That being said, lawyers addressing the Court will use their own language and all judgments are translated into and reported in all the official languages of the EU. However, the Court’s working language has always been and remains French. This means that judges and Advocates General need to speak and read French to a high standard. The judgment is usually drafted in French before being translated into the official language of the case and then in all other languages.

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Cases may begin either with a request from a national court for a preliminary ruling or as a direct action. The applicant submits an application to the Court, stating in detail the whole case. Since September 2011, documents may be filed online via e-Curia at (see Decision of the Court of Justice on the Lodging and Service of Procedural Documents by Means of e-Curia (2011/C 289/ 06)). No fee is payable though it is obligatory to employ a lawyer, presumably to save everyone’s time.

Application

Figure 8.2

Written proceedings

Oral proceedings including Opinion of the Advocate General

Judgment

Procedure in the Court of Justice

Upon registration of the case, the application is served on the defendant who may lodge a defence. Each party has the right to reply to the other. Thereafter the Court takes over the initiative by assigning a Judge-Rapporteur to the case and allocating it to an Advocate General. Also, the Court assigns the case to a chamber or the full Court, depending on the importance of the case (Article 60(1) and (2) of the Rules of Procedure ([2012] OJ L265/1 as amended in 2013, 2016 and 2019)). The JudgeRapporteur’s first job is to decide whether a preliminary inquiry, an inquisitorial process in which the Court itself hears witnesses of fact and expert witnesses and demands documents, is necessary. The Judge-Rapporteur then investigates the legal issues and prepares a summary of the case. At this stage, emphasis is put on written proceedings. EU institutions and Member States have a right of third-party intervention. It is quite common and very useful for the Commission, for example, to intervene to clarify the meaning of a directive’s provisions. Also, Member States may be keen to have their say about a law that might affect them, especially in relation to enforcement (see further 7.2). For example, in Case C-304/02 Commission v France [2005] ECR I-6263, the Commission as well as 17 Member States presented their views at the oral hearing. More recently, Case C-543/17 Commission v Belgium EU:C:2019:573 attracted the intervention of 10 Member States. After reading the report of the Judge-Rapporteur and hearing the views of the Advocate General, the Court decides whether any further preparatory inquiries are needed, the type of formation to which the case should be assigned and whether a hearing should be held for oral argument. The Judge-Rapporteur’s report summarising the facts, the procedure and the arguments of the parties is then made public. The case is finally argued at a public hearing at which the parties’ lawyers address the court for no more than 30 minutes. Weeks later, the Advocate General delivers an impartial, independent Opinion before the Court of Justice, again in open court. The recommendation in the Opinion of the Advocate General is not binding on the Court or on the parties but it may be used and cited (if the Court chooses to do so), as Opinions of Advocates General often contain very detailed and high standards of legal analysis. There is no right for the parties to submit observations in response to the Opinion of the Advocate General (Case C-442/14 Bayer CropScience SA-NV and Stichting De Bijenstichting v College voor de toelating van gewasbeschermingsmiddelen en biociden EU:C:2016:890, para 37).

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This marks the end of the oral stage of the proceedings. The Court can, however, under Article 83 of its Rules of Procedure reopen the oral part of the procedure if it needs further information or where it transpires that the case has to be decided on arguments not yet debated between the parties or the interested persons (see Case C116/11 Bank Handlowy w Warszawie SA and PPHU ‘ADAX’/Ryszard Adamiak v Christianapol sp z o.o. EU:C:2012:739, para 28). In practice, it has never done so. The judges of the Court of Justice then deliberate on the basis of the draft judgment drawn up by the Judge-Rapporteur and are expected to agree on a final and single judgment. The reasoning of the Court in its judgment may not be as comprehensive and fully argued as the Opinion of the Advocate General given that the Court must reach a single judgment. The deliberations of the judges are strictly secret. No one else is allowed in, not even interpreters, hence the need for the judges to have a common language, French. They will try to reach consensus but if need be they will take a vote. Yet, following the Continental method, no one ever knows how the result is reached, the idea being that judgments are collegial. No dissenting opinions are recorded either. Judgments are signed by all the judges who took part in the deliberation and their operative part is pronounced in open court. Judgments are also published: the operative part in the Official Journal of the European Union and the whole judgment, together with the Advocate General’s Opinion, in the official law reports (European Court Reports or ECR) and online. Preliminary rulings brought under Article 267 TFEU go back to the referring national court to be dealt with (see 9.7). For all other cases, judgments are declaratory. Pursuant to Article 260(1) TFEU (enforcement action) (see 7.2.1.2) and Article 266, first paragraph TFEU (judicial review actions) (see 10.2.5), the Court’s judgments are binding and it is assumed that they will be obeyed. Whilst EU institutions abide by the rulings of the Court, some Member States fail to comply with its judgments. As a result, the 1992 Maastricht Treaty introduced a procedure whereby a Member State may in certain circumstances be taken back to the Court and fined an unlimited amount (see 7.2.2). 8.2.2.2

Orders and Opinions The Court of Justice is also endowed with the power to give ‘Orders’ and ‘Opinions’. Orders precede a judgment, notably because they are the tool used by the Court to reply to an application for interim measures. Under Article 279 TFEU, the Court ‘may in any cases before it prescribe any necessary interim measures’. Whilst the majority of orders are issued in relation to enforcement measures (see 7.2.1.2), some are made under Article 278 TFEU which specifies that in certain circumstances the Court, whilst a case is pending, can ‘order that application of the contested act be suspended’. The reason for the small number of orders made under the latter category is that EU acts are presumed to be lawful and so the suspension of the operation of an EU act is exceptional (Case T131/16 R Belgium v Commission EU:T:2016:427, para 12). In Case T-388/19 R Puigdemont i Casamajóv and Comín i Oliveres v Commission EU:T:2019:467, the two applicants who had been candidates for the 2019 elections of the European Parliament unsuccessfully sought the suspension of several decisions of the European Parliament that prevented them from taking their seats and denied them their concomitant privileges and immunities. Opinions, on the other hand, relate to the compatibility of international agreements with the EU Treaties and, contrary to their name, they are binding as, should the Court give a negative Opinion, the EU institutions cannot enter into the particular agreement unless either the agreement or the EU Treaties are revised (Article 218(11) TFEU). For

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example, the Court issued Opinion 2/94 [Accession by the Community to the European Convention for the Protection of Human Rights and Fundamental Freedoms] [1996] ECR I-1759, in which it declared that the EU could not at the time accede to the ECHR as it would be beyond the scope of what is now Article 352 TFEU. The Court was of the view that only a subsequent treaty amendment could provide a legal basis for the EU to become a party to the ECHR. This power has now been granted to the EU by virtue of Article 6(2) TEU. Yet, in spite of the amendment, in its Opinion 2/13 (8.1 above), the Court declared that the 2013 draft Agreement on the Accession of the EU to the ECHR was incompatible with Article 6(2) TEU or with Protocol (No 8) relating to Article 6(2). in practice Since 1989 case numbers include a letter to indicate the court that made the ruling. Citations of cases decided by the General Court start with ‘T-’, as the General Court used to be called the ‘tribunal de première instance’ in French (‘Court of First Instance’ in English). For example, Case T-201/04 Microsoft Corp v Commission [2007] ECR II3601. Citations of cases decided by the Court of Justice start with ‘C-’. For example, Case C-376/98 Germany v European Parliament and Council (Re Tobacco Advertising) [2000] ECR I-8419. In 2014 the European Union introduced the European Case Law Identifier (ECLI) that is composed of a number for each judgment, which identifies the originating jurisdiction, the code of the court that rendered the judgment, the year of the judgment and its number. Each element is separate by a colon. For example, EU:T:2014:1095 for Case T-400/10 Hamas v Council of 17 December 2014.

8.3 The General Court The General Court was originally established under the name ‘Court of First Instance’ on 1 January 1989 by Council Decision 88/591 ([1988] OJ L319/1) in accordance with the provisions of the Single European Act 1986. The General Court, governed by Article 256 TFEU and its own Rules of Procedure, has 54 judges of the same calibre as the judges of the Court of Justice (see 8.2 above). There are no Advocates General in the General Court, but judges can act as Advocates General if ‘the legal difficulty or the factual complexity of the case so requires’ (Article 30 of the Rules of Procedure of the General Court ([2015] OJ L105/1 as amended)). Much like the Court of Justice, the General Court works in Chambers. The Chambers are composed of three or five judges (Article 13 of the Rules of Procedure of the General Court), whereas the Grand Chamber sits with 15 judges (Article 15 of the Rules of Procedure of the General Court). It should be noted that among the 10 Chambers of the Court, four handle civil service cases and six examine intellectual property matters ([2019] OJ C246/2). The General Court hears cases involving: (a) annulment actions under Article 263, fourth paragraph TFEU brought by natural or legal persons against acts of EU institutions, bodies, offices or agencies which are addressed to them (eg, a case brought by a company against a Commission decision imposing a fine on that company, as in competition law) or which are of direct and individual concern to them; or against regulatory acts which are of direct concern to them and do not entail implementing measures (see 10.2.4.3);

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(b) actions under Article 265 TFEU brought by natural or legal persons against a failure to act on the part of EU institutions, bodies, offices or agencies (see 10.3); (c) actions under Article 263 TFEU brought by the Member States against the Commission (see 10.2); (d) actions under Article 263 TFEU brought by Member States against the Council’s acts in the field of State aid, ‘anti-dumping’ measures and acts by which the Council exercises implementing powers; (e) actions under Articles 268 and 340 TFEU seeking compensation for damage caused by EU institutions, bodies, offices or agencies or their staff (see further 10.5); (f) actions based on agreements made by EU institutions (eg, a grant agreement between the Commission and a university) and which expressly give jurisdiction to the General Court (see 10.5); (g) actions relating to EU trade marks and designs against decisions of the Office for Harmonisation in the Internal Market; (h) actions brought against decisions of the Community Plant Variety Office or of the European Chemicals Agency. The General Court also sits in Luxembourg and is administered by a registrar and staff. Each judge is free to appoint and employ up to three référendaires (see 8.2).

8.4 Specialised courts Article 257 TFEU provides for the creation of Specialised Courts by the European Parliament and the Council, acting in accordance with the ordinary legislative procedure. One such court was the EU Civil Service Tribunal, which was established by Decision 2004/752 ([2004] OJ L333/7). It was abolished by Regulation 2016/1192 (Regulation on the Transfer to the General Court of jurisdiction at first instance in disputes between the European Union and its servants ([2016] OJ L200/137)) and its jurisdiction transferred to the General Court.

8.5 Methods of interpretation The methods which the Court employs when interpreting EU law are, in some respects, very different from those used by the judiciary in the UK. In Bulmer v Bollinger SA [1974] 4 Ch 401, at 411 (CA), Lord Denning stated: The [EU] Treaty is quite unlike any of the enactments to which we have become accustomed … It lays down general principles. It expresses its aims and purposes. All in sentences of moderate length and commendable style. But it lacks precision. It uses words and phrases without defining what they mean. An English lawyer would look for an interpretation clause, but he would look in vain. There is none. All the way through the Treaty there are gaps and lacunae. These have to be filled by the judges, or by regulations or directives. It is the European way … Seeing these differences, what are the English courts to do when they are faced with a problem of interpretation? They must follow the European pattern. No longer must they argue about the precise grammatical sense. They must look to the purpose and intent … They must divine the spirit of the Treaty and gain inspiration from it. If they find a gap, they must fill it as best

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as they can … These are the principles, as I understand it, on which the European Court acts. The methods of interpretation used by the Court of Justice are derived from international law and more specifically from Articles 31 to 33 of the Vienna Convention on the Law of Treaties. Yet the Court has altered these methods of interpretation to suit its needs. The Court’s interpretation method is best summarised in the following manner: in interpreting a provision of EU law, it is necessary to consider not only its wording but also the context in which it occurs and the objectives pursued by the rules of which it is part … and, in the circumstances of this case, the history of that legislation …. (Case C-102/16 Vaditrans BVBA v Belgium EU:C:2017:1012, para 20, emphasis added) In some cases, the second part of the sentence is formulated in the following manner: ‘The origins of a provision of EU law may also provide information relevant to its interpretation’ (see eg Commission v Belgium, 8.2.2.1 above, para 49). All in all, there are three main (literal, contextual or systematic, and teleological) and one subsidiary (historical) methods the Court employs when interpreting EU law: (a) Literal. The ordinary dictionary meaning of the words is used to interpret the law. The grammatical or literal interpretation of EU texts causes a significant problem, mainly because these documents are authentic in all the languages that are recognised by the EU. As a result, this approach to interpreting the law is limited. (b) Contextual or systematic. This method involves looking at EU law as a whole. It entails examining not only the provision as such but also the provision in its context, that is the entire act (especially the preamble, the section or chapter in which the provision is included, etc). Further, the Court may interpret the provision by reference to other related acts, such as a Protocol to the Treaty of the EU. The meaning of the norm is constructed by reference to its place within the general scheme of the legislative, treaty or constitutional system. (c) Teleological. The law is interpreted in a way that furthers the purposes of the EU. This method is frequently used by the Court. Any EU act lends itself to this method owing to the usually lengthy preamble setting out the aims and objectives of the act in question. In other words, a functional perspective is adopted, for the Court tries to achieve the broad goals set in primary law. In Opinion 2/13 the Court explained that ‘the implementation of the process of integration … is the raison d’être of the EU itself’ (8.1 above, para 172). A fourth method, the historical interpretation, which searches for the original meaning of a rule, is not used much by the Court of Justice. The reasons for this are that the legislative history of EU law is often complex and not published in its entirety, and that EU law is the result of compromises. Whilst the Court could refer to the recitals in the preamble of EU acts or to the preparatory work relating to the treaties (see eg Commission v Belgium (above), para 52) to understand the history of a particular EU act or EU treaty provision, it prefers to use them for a purpose-orientated interpretation of the act. For example, in Pringle, the Court, after explaining that to determine the objective pursued by Article 125 TFEU it was necessary to recall the origin of the rule, proceeded to explore the preparatory work to the Treaty of Maastricht (Case C-370/12 Pringle v Government of Ireland, Ireland, The Attorney General EU:C:2012:756, paras 133–135). Yet, it refuses to consider minutes of meetings of the Commission, the Council and the European Parliament as reflections of the

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history of the act, unless specifically referred to in the wording of a provision of secondary legislation (Case C-404/06 Quelle AG v Bundesverband der Verbraucherzentralen und Verbraucherverbände [2008] ECR I-2685, para 32). When used, the history of a legislative act serves to confirm the result of the application of the main methods of interpretation (see eg Joined Cases C-360/15 and C-31/16 College van Burgemeester en Wethouders van de gemeente Amersfoort v X BV and Visser Vastgoed Beleggingen BV v Raad van de gemeente Appingedam EU:C:2018:44, para 108). The Court will then state that ‘that interpretation …. is supported by the legislative history of that provision’ (see eg Case C-48/97 Kuwait Petroleum (GB) Ltd and Commissioners of Customs & Excise EU:C:1999:203, para 23; Vaditrans, para 34). The Court makes little recourse to comparative law, although many EU acts are inspired by legislation in Member States. It may also seem surprising that judges from such a variety of legal systems do not use their knowledge of their own legal systems. It is argued that the reason for avoiding references to national legal systems, and thus not adopting a comparative approach to interpreting EU law, is that the Court endeavours to prevent the autonomy of the EU legal system being undermined by references to particular State legal systems. For EU norms and principles to be implemented in an autonomous and consistent manner, their interpretation must be independent of national preconceptions. After all, the Treaties have created a ‘new legal order’. In practice, the Court often uses a combination of the second and third methods set out above. This is often referred to as the practical effectiveness (effet utile) doctrine. The Court stated in Case C-223/98 Adidas AG [1999] ECR I-7081 that: [W]here a provision of [EU] law is open to several interpretations, only one of which can ensure that the provision retains its effectiveness, preference must be given to that interpretation. (para 24, emphasis added) For example, under this doctrine, the Court accepted in Van Gen den Loos that if individuals were entitled to invoke a specific measure before the national courts, the measure would have greater relevance and impact. Therefore, in Case 26/62 NV Algemene Transport- en Expeditie Onderneming van Gend & Loos v Netherlands Inland Revenue Administration [1963] ECR 1, the Court thought it would be suitable for certain provisions to be directly effective: A restriction of the guarantees against an infringement of Article 12 [TEEC] [now Article 30 TFEU] by Member States to the procedures under Articles [158 and 159 TFEU] would remove all direct legal protection of the individual rights of their nationals. There is the risk that recourse to the procedure under these Articles would be ineffective if it were to occur after the implementation of a national decision taken contrary to the provisions of the Treaty. The vigilance of individuals concerned to protect their rights amounts to an effective supervision in addition to the supervision entrusted by Articles [158 and 159 TFEU] to the diligence of the Commission and of the Member States. It follows from the foregoing considerations 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. (at 13, emphasis added) It was, however, only in Grad that the Court, in a similar situation, ie that of the possibility for an individual to invoke EU law before national courts, used the term ‘effet utile’ (Case 9/70 Grad v Finanzamt Traunstein [1970] ECR 825, para 5). The effet utile doctrine enables the Court to go beyond the text. In X BV, the Court avows that

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to ensure that the effet utile of the specific legal framework that the EU legislature intended to establish in adopting Directive 2006/123 is not undermined, it must be accepted … that the scope of that directive is capable of extending, in certain cases, beyond what is strictly laid down in the provisions of the FEU Treaty relating to freedom of establishment and the free movement of services (para 107). This approach is particularly well illustrated by the extension of the concept of a ‘worker’ under EU law to part-time employees (Case 53/81 Levin v Staatssecretaris van Justitie [1982] ECR 1035), individuals undertaking training (Case C-3/90 Bernini v Minister van Onderwijs en Wetenschappen [1992] ECR I-1071), job-seekers (Case C292/89 R v Immigration Appeal Tribunal, ex parte Gustaff Desiderius Antonissen [1991] ECR I-745), doctoral candidates (Case C-94/07 Raccanelli v Max-Planck-Gesellschaft zur Förderung der Wissenschaften eV [2008] ECR I-5939) and individuals earning so little that their wages had to be supplemented by public assistance (Case 139/85 Kempf v Staatssecretaris van Justitie [1986] ECR 1741) (see further 15.2.1). In essence, the interpretation of EU law rests on three principles: uniformity (see 9.1), effectiveness, and the protection of individual rights.

se

ca ple In Case T-18/10 Inuit Tapiriit Kanatami v European Parliament and Council [2011] ECR IIm exa 5599, the General Court had to interpret the new Article 263, fourth paragraph TFEU that introduced the concept of ‘regulatory act’ (see 10.2.4.3). To do so, the Court used the literal, contextual, historical and teleological methods of interpretation. After using a literal approach and comparing the old and the new modified article, the Court concluded that the word ‘regulatory’ covers a limited number of acts of general application (paras 41–43). A contextual approach revealed that in light of Article 263, first paragraph TFEU, two categories of acts are subject to review – (i) legislative acts, and (ii) ‘other binding acts intended to produce legal effects vis-à-vis third parties’ (para 44) – which, read in conjunction with Article 263, fourth paragraph TFEU, means that judicial review proceedings may be instituted by individuals ‘(i) against a legislative or regulatory act of general application which is of direct and individual concern to them and (ii) against certain acts of general application, namely regulatory acts which are of direct concern to them and do not entail implementing measures’ (para 45). An examination of the history of the process that led to the adoption of Article 263, fourth paragraph TFEU shows that the drafters wanted to distinguish between legislative and regulatory acts, and limit the ability of individuals to challenge legislative acts (para 49). Last but not least, the Court investigated the purpose of the provision, which is to enable judicial review of acts of general application (though not legislative acts) so as to avoid the situation whereby a natural or a legal person would have to infringe the law to have access to the court (para 50). As a conclusion, the Court stated: In view of the foregoing, it must be held that the meaning of ‘regulatory act’ for the purposes of the fourth paragraph of Article 263 TFEU must be understood as covering all acts of general application apart from legislative acts. Consequently, a legislative act may form the subject-matter of an action for annulment brought by a natural or legal person only if it is of direct and individual concern to them. (para 56)

8.6 The CJEU as a constitutional court and judicial activism The jurisdiction of the CJEU is set out by Articles 256 to 279 TFEU. The CJEU does not have ‘residual’ or ‘inherent’ powers and can exercise its powers only within the jurisdiction conferred upon it (Article 13(2) TEU). For example, in any non-Union policy area, the CJEU’s jurisdiction is either excluded or limited by various articles in

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the Treaty: Article 24(1) TEU and Article 275 TFEU rule out judicial review of provisions pertaining to the Common Foreign and Security Policy. Using the methods of interpretation discussed in 8.5 above, the Court has undeniably become a motor for integration, ensuring and extending the primacy of EU law. In particular it has fashioned the constitutional framework of the EU by its interpretation of the primary sources (see 4.2). For example, the CJEU has: (a) created new concepts – the principle of direct effect (van Gend & Loos) (see further 7.3) and the principle of supremacy (Case 6/64 Costa v ENEL [1964] ECR 585) (see further 7.2); (b) created new liability regimes – Member State liability (Joined Cases C-6 and 9/90 Francovich and Bonifaci and Others v Italy [1991] ECR I-5357) (see further 7.3); (c) declared that fundamental rights are to be protected under EU law (Case 29/69 Stauder v City of Ulm [1969] ECR 419) and specified and extended EU fundamental freedoms (see further 4.6); (d) broadened certain definitions (eg definition of ‘measures having an equivalent effect’ to quantitative restrictions (Case 8/74 Procureur du Roi v Dassonville and Dassonville [1974] ECR 837; Case 120/78 Rewe-Zentral AG v Bundesmonopolverwaltung für Branntwein [1979] ECR 649) (see further 13.2.3); given new powers to the EU, eg the power to negotiate, sign and ratify international treaties in fields in which it has competence internally (Case 22/70 Commission v Council (Re ERTA) [1971] ECR 263) (see further 3.2.2). Its constitutional role is also reflected in its attitude towards external legal systems such as international law. Under Article 218(11) TEU, a Member State, the European Parliament, the Council or the Commission may obtain the opinion of the Court as to whether an agreement envisaged is compatible ‘with the Treaties’. The Court has also used the preliminary reference procedure to ascertain the validity of international treaties (9.2.1). The Court has interpreted this as a means to ensure that treaties are compatible with the EU constitutional framework to the effect that ‘international agreements entered into by the Union must be entirely compatible with the Treaties and with the constitutional principles stemming therefrom’ (Opinion 1/17 [Comprehensive Economic and Trade Agreement between Canada and the European Union and its Member States] EU:C:2019:341, para 165; see also Opinion 1/15 [EUCanada PNR Agreement] EU:C:2017:592, para 67; Case C-266/16 Western Sahara Campaign UK v Commissioners for Her Majesty’s Revenue and Customs and Secretary of State for Environment, Food and Rural Affairs EU:C:2018:118, para 46). The test is whether ‘[a]n international agreement entered into by the Union may, moreover, affect the powers of the EU institutions provided, however, that the indispensable conditions for safeguarding the essential character of those powers are satisfied and, consequently, there is no adverse effect on the autonomy of the EU legal order’ (Opinion 1/17, para 107). As a result, the Court has emerged as a strong guarantor of the specific characteristics and the autonomy of the EU legal order. Indeed, since its Opinion 1/91 [Agreement between the Community and the Countries of the European Free Trade Association Relating to the European Economic Area] EU:C:1991:490, para 35, the Court has consistently interpreted Article 19(1) TFEU as endowing it with the responsibility to ensure respect for the autonomy of the European Union legal order (see Opinion 1/09 [Agreement on Creation of a Unified Patent Litigation System] EU:C:2011:123, para 67). Whilst the Court has not been averse to the penetration of international rules into the EU legal order (international

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agreements form an integral part of EU law), it has cautioned against the possibility that the EU may be subject to external control mechanisms. Its justification is that giving an institution, and especially a court, such powers could jeopardise the autonomy of the EU legal order and affect the interpretation of EU law (Opinion 2/13, 8.1 above, paras 180–190 and 196–200). A similar position was adopted by the Court in relation to tribunals set up by treaty between Member States (Case C-284/16 Slovakia v Achmea BV EU:C:2018:158, paras 57–60). Thus, the Court has established a fully-fledged, autonomous legal system. Yet its interpretation of EU law has raised concerns. Some Member States and scholars accuse the CJEU of going beyond the letter of the Treaties in its development of EU law. By its so-called judicial activism the Court, it is argued, has acted as a law-maker, reshaping the architecture of the EU without the consent of the Member States. In defence of the Court, it should be noted that the original treaty was a framework treaty that needed to be fleshed out, as it regulated only a few topics in exhaustive detail. Moreover, treaties are the result of compromises made during negotiations, are often formulated in vague terms and present a patchwork of legal provisions. The multilingual character of EU law also offers numerous opportunities for the Court to choose a suitable interpretation of the law. A new doctrine or principle is usually introduced in a ground-breaking judgment. Then, in subsequent cases, the Court gradually clarifies the scope of application of the doctrine or principle by specifying conditions, expanding the initial scope of application or assisting authorities in the application of the law. in practice The way the Court proceeds in introducing and developing a doctrine as well as specifying its limits can be seen in the example of the doctrine of indirect effect (see further 6.3.5.1). Introducing the doctrine Case 14/83 Von Colson and Kamann v Land Nordrhein-Westfalen [1984] ECR 1891. Limitations • A directive may have indirect effect only after the deadline for its implementation has expired (Case C-212/04 Adeneler and Others v Ellinikos Organismos Galaktos (ELOG) [2006] ECR I-6057). • Interpretation of a provision cannot result in a conflict with a general principle of EU law (Case 80/86 Criminal proceedings against Kolpinghuis Nijmegen BV [1987] ECR 3969). • There are no obligations on individuals if there was no proper implementation of a directive (Case C-456/98 Centrosteel Srl v Adipol GmbH [2000] ECR I-6007 (especially if criminal liability involved (Case C-168/95 Criminal proceedings against Arcaro [1996] ECR I-4705)).

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Assistance in the application • Interpretation can go only ‘so far as possible’ (Case C-91/92 Faccini Dori v Recreb Srl [1994] ECR I-3325) • National courts must consider the whole body of national rules and interpret them, so far as possible, in the light of the wording and purpose of the directive in order to achieve an outcome consistent with the objectives of the directive (Joined Cases C-397/01 to C-403/01 Pfeiffer et al v Deutsches Rotes Kreuz, Kreisverband Waldshut eV [2004] ECR I-8835). • National law may be disapplied if it is impossible to interpret it in conformity with the directive (Case C-555/07 Kücükdeveci v Swedex GmbH & Co KG [2010] ECR I-365).

At the same time, the Court has also been criticised for not being activist enough and for trying to limit the ability of natural and legal persons to question the work of the EU and its institutions. For example, for a long time, the requirements for EU liability (see 10.5) were more difficult to fulfil than the requirements for Member State liability (see 7.3). Also, the Court has been reluctant to offer a broad interpretation of the requirements for action for annulment initiated by a legal or natural person, even pointing out that such an interpretation would go against the Treaty and was best left to be amended by the Member States (see 10.2.4.3), or to accept the principle of damages liability where it concerns EU acts (see 10.5). However, others have argued that the Court is merely doing what it was set up to do: helping to create the ‘ever closer union’ mentioned in the original Treaty and reaffirmed in later Treaties.

8.7 Further reading Alemanno A and Pech L, ‘Thinking Justice Outside the Docket: A Critical Assessment of the Reform of the EU’s Court System’ (2017) 54 CML Rev 129. Arnull A, ‘The Court of Justice Then, Now and Tomorrow’ in Derlén M and Lindholm M (eds), The Court of Justice of the European Union. Multidisciplinary Perspectives (Hart, 2018), 1. Barents R, ‘The Court of Justice after the Treaty of Lisbon’ (2010) 47 CML Rev 709. Burrows N and Greaves R, The Advocate General and EC Law (OUP, 2007). Butler G, ‘Pre-Ratification Judicial Review of International Agreements to be Concluded by the European Union’ in Derlén M and Lindholm M (eds), The Court of Justice of the European Union. Multidisciplinary Perspectives (Hart, 2018), 53. Dawson M, De Witte B and Muir E (eds), Judicial Activism at the European Court of Justice (Edward Elgar Publishing, 2013). De Waele H, ‘The Role of the European Court of Justice in the Integration Process: A Contemporary and Normative Assessment’ (2010) 6 Hanse Law Review 3. Itzcovich G, ‘The Interpretation of Community Law by the European Court of Justice’ (2009) 10 German Law Journal 537. Horsley T, The Court of Justice of the European Union as an Institutional Actor. Judicial Lawmaking and its Limits (CUP, 2018). Jacobs F, ‘The Lisbon Treaty and the Court of Justice’ in Biondi A et al (eds), EU Law after Lisbon (OUP, 2012) 197.

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Poiares Maduro M, ‘Interpreting European Law: Judicial Adjudication in a Context of Constitutional Pluralism’ (2007) 1 European Journal of Legal Studies 1. Solanke I, ‘“Stop the ECJ”?: An Empirical Analysis of Activism at the Court’ (2011) 17(6) EL Rev 764. Tamm D, ‘The History of the Court of Justice of the European Union since its Origin’ in Court of Justice of the European Union, Justice and the Construction of Europe: Analyses and Perspectives on Sixty Years of Case-Law (Asser Press, 2013) 9. Summary

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The CJEU is not a single judicial body; rather, it is composed of the Court of Justice, the General Court (and potentially specialised courts). The procedure before the Court is mainly written and its judgments are collegiate. As the Court has adopted specific methods of interpretation that allow it to provide a broad interpretation of EU law and its principles, it has often been accused both by Member States and by academics of judicial activism.

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Critically discuss, by using relevant examples, whether you believe that the CJEU has gone beyond its powers. The CJEU has been the motor for integration since its inception. Now that the Member States (via the Treaties) and the European institutions (via secondary legislation) have created a comprehensive set of EU norms, there is no longer a need for judicial activism. Discuss.

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After reading this chapter, you will be able to understand: • the aim of the Article 267 TFEU preliminary ruling procedure and the division of tasks between the ‘national court or tribunal’ and the CJEU • the type of questions that can be referred to the CJEU • which national courts and tribunals can refer questions to the CJEU • when a national court or tribunal is obliged to refer questions to the CJEU • when the CJEU might refuse to hear a preliminary ruling • the special preliminary ruling procedures • the effects of the preliminary ruling.

9.1 Introduction Much of the responsibility for applying the rules laid down in the EU treaties and acts belongs to the national courts of the Member States. Indeed, Article 19(1) TFEU stipulates: Member States shall provide remedies sufficient to ensure effective legal protection in the fields covered by Union law. As the Court stated in Commission v Poland, Article 19 gives concrete expression to the value of the rule of law enshrined in Article 2 TEU, entrusting ‘the responsibility for ensuring the full application of EU law in all Member States and judicial protection of the rights of individuals under that law to national courts and tribunals and to the Court of Justice’ (Case C-619/18 Commission v Poland EU:C:2019:531, para 47). In other words, national courts have, along with the CJEU, turned into ‘the guardians of [the European] legal order’ (Opinion 1/09 [Agreement on a Unified Patent Litigation System] EU:C:2011:123, para 66). In the words of Advocate General Mancini, ‘the national court …, as is well known, is also a [Union] court’ (Case 237/82 Jongeneel Kaas BV and Others v State of the Netherlands and Stichting Centraal Orgaan Zuivelcontrole, Opinion of Advocate General Mancini EU:C:1983:294, para 12). It is, however, expected that national courts display certain qualities. Although they are distinct from the CJEU (principle of judicial autonomy) and ‘the organisation of justice in the Member States falls within the competence of those Member States’, Member States are required to provide remedies that ensure effective legal protection in the fields covered by EU law (Commission v Poland, paras 52–55) and this means that such courts must be independent (para 58). The Court has stressed that ‘[t]he independence of national courts and tribunals is, in particular, essential to the proper working of the judicial cooperation system embodied by the preliminary ruling mechanism under Article 267 TFEU’ (Case C-46/16 Associação Sindical dos Juízes Portugueses v Tribunal de Contas EU:C:2018:117, para 43). Besides involving a third party in settling a dispute (Case C-506/04 Wilson v Ordre des avocats du barreau de

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Luxembourg EU:C:2006:587, para 49), the concept of independence has, according to the Court, two aspects (Wilson, paras 49–52): (1) external: the national court must exercise its functions autonomously, ie it is not subordinate to another body and does not take orders from another source (Commission v Poland, para 72; see also Associação Sindical dos Juízes Portugueses, para 44); (2) internal: the national court must be impartial and ensure that equal distance is maintained from the parties and their interests (Commission v Poland, para 73; see also Wilson, para 52; Case C-216/18 PPU LM (Minister for Justice and Equality (Deficiencies in the System of Justice)) EU:C:2018:586, para 65). As a result: Those guarantees of independence and impartiality require rules, particularly as regards the composition of the body and the appointment, length of service and grounds for abstention, rejection and dismissal of its members, that are such as to dispel any reasonable doubt in the minds of individuals as to the imperviousness of that body to external factors and its neutrality with respect to the interests before it. (Commission v Poland, para 74; see also slightly differently phrased in Minister for Justice and Equality (Deficiencies in the System of Justice), para 66) Yet, this autonomy of national courts raises the problem that the same rules would be interpreted differently depending on the State where they are applied. Surely, this would hinder the uniformity of EU law. After all, it is of the utmost importance for the CJEU to secure uniformity in the EU legal order (Case 166/73 Rheinmühlen-Düsseldorf v Einfuhr- und Vorratsstelle für Getreide und Futtermittel (No 1) [1974] ECR 33; Opinion 1/09, para 83 and Opinion 2/13 [Agreement on Accession of the European Union to the Convention for the Protection of Human Rights and Fundamental Freedoms] EU:C:2014:2454, para 176) and so ‘ensure its full effect and its autonomy as well as, ultimately, the particular nature of the law established by the Treaties’ (Commission v Poland, para 45). Article 267 TFEU lays down a procedure that enables national courts to ask the CJEU for guidance on the interpretation or validity of provisions of EU law they must apply before giving judgment in cases brought before them (Opinion 1/09, para 83). The preliminary ruling procedure is primarily an instrument of direct cooperation between the CJEU and the national courts, and thus the relationship between the courts is not hierarchical (Opinion 1/09, para 84) but one of dialogue (Opinion 2/13, para 176) since the Court provides an interpretation of EU law ‘as is necessary for [the national courts] to give judgment in cases upon which they are called to adjudicate’ (Case C-169/18 Mahmood and Others v Minister for Justice and Equality EU:C:2019:5, para 21). Generally, the principle of cooperation between national courts and the CJEU must be understood as part of the broader principle of cooperation between the Member States and the EU enshrined in Article 4(3) TEU: Pursuant to the principle of sincere cooperation, the Union and the Member States shall, in full mutual respect, assist each other in carrying out tasks which flow from the Treaties. The Member States shall take any appropriate measure, general or particular, to ensure fulfilment of the obligations arising out of the Treaties or resulting from the acts of the institutions of the Union.

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The Member States shall facilitate the achievement of the Union’s tasks and refrain from any measure which could jeopardise the attainment of the Union’s objectives. Both sets of courts have distinct, albeit complementary, roles to play in finding a solution to a case, which is consistent with EU law. Yet, in the end, the Court has ‘exclusive jurisdiction to give the definitive interpretation of [EU] law’ (Opinion 1/17 [Comprehensive Economic and Trade Agreement between Canada and the European Union and its Member States] EU:C:2019:341, para 111, emphasis added) In Case C-614/14 Ognyanov EU:C:2016:514 the Court explained that this procedure ‘constitutes the keystone of the European Union judicial system’ (para 15). It is under this procedure that the CJEU has created or further developed major principles that have shaped the EU legal order and law, such as supremacy (see 6.2), direct effect (see 6.3), Member State liability (see 7.3), free movement of goods (see Chapters 12–14), European citizenship (see Chapter 19), etc. Undoubtedly, references from national courts now often represent the largest category of cases brought before the Court in a single year. For example, in 2019, out of 966 cases dealt with by the Court of Justice, 641 (66%) were preliminary references (Court of Justice of the European Union, Annual Report 2019 – Judicial Activity, February 2020, 160). The average duration of cases brought for preliminary rulings amounted to 15.5 months in 2019 (Annual Report 2019 – Judicial Activity, 15).

9.2 Jurisdiction of the Court of Justice of the European Union and division of tasks The CJEU has interpreted its jurisdiction under Article 267, first paragraph in a strict manner, entrusting national courts with the application of EU law and thus ensuring a clear division of tasks between the CJEU and the national courts.

9.2.1 Jurisdiction of the Court of Justice of the European Union The jurisdiction of the CJEU as regards the preliminary reference procedure is spelled out in Article 267, first paragraph TFEU, which provides: The Court of Justice of the European Union shall have jurisdiction to give preliminary rulings concerning: (a) the interpretation of the Treaties; (b) the validity and interpretation of acts of the institutions, bodies, offices or agencies of the Union. … Moreover, the General Court has competence to hear Article 267 applications in certain areas laid down by the Statute of the Court of Justice (Article 256(3) TFEU). In other words, preliminary references may be made in relation to two judicial functions: (a) the interpretation of EU law (regarding the meaning of EU law); and (b) the validity of EU law (regarding the validity of binding secondary EU measures (eg directives) in the light of EU law and international law that binds the EU). These two functions are, however, limited:

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(a) the CJEU does not concern itself with the facts of the case pending before the national court, and does not rule on the validity of national law (see 9.2.2 below); and (b) it will not examine the validity of EU law if this could have been done under Article 263 TFEU (see further 10.2). See Figure 9.1. All acts of the EU institutions, without exception, can be the subject of a preliminary ruling (Case C-322/88 Grimaldi v Fonds des Maladies Professionnelles [1989] ECR 4407, para 8). The CJEU has interpreted ‘acts of [the EU] institutions’ (see 4.3) in its widest sense. For example, the Court agreed to interpret a Memorandum of Understanding between the EU and a Member State because it found its basis in EU law (TFEU and a related regulation) and had been concluded by the EU represented by the Commission (Case C-258/14 Florescu and Others v Casa Judeţeană de Pensii Sibiu and Others EU:2017:448, paras 31–36). Moreover, the Court also examines international agreements between the EU and other States (Case 181/73 R & V Haegeman v Belgium [1974] ECR 449, see 8.6). Yet, the jurisdiction of the CJEU in relation to the interpretation of EU law is not limited to the treaties and Figure 9.1 Jurisdiction of the CJEU in the the acts of the institutions. In practice, the CJEU will also preliminary reference procedure agree to examine law of a non-binding nature. For example, in Grimaldi, the Court looked at a recommendation, in Case C-410/13 ‘Baltlanta’ UAB v Lithuania EU:C:2014:2134 it interpreted Commission guidelines, and in Case C-526/14 Kotnik and Others v Državni zbor Republike Slovenije EU:C:2016:570 a Commission’s Banking Communication (paras 31–34). The Court’s jurisdiction to verify the validity of an act is, however, limited to acts of the institutions of the EU. It cannot review the validity of the Treaties nor other acts of primary law which include the protocols or acts of accession (see 4.2). However, in Pringle, the Court ruled that it had jurisdiction to examine the validity of a European Council decision adopted according to the simplified procedure under Article 48(6) TEU (4.2) that allowed the European Council to amend Article 136 TFEU with regard to a stability mechanism within the eurozone on the ground that it was for the Court to verify, first, that the procedural rules laid down in Article 48(6) TEU were followed and, secondly, that the amendments decided upon concern only Part Three of the FEU Treaty, which implies that they do not entail any amendment of provisions of another part of the Treaties on which the European Union is founded, and that they do not increase the competences of the Union. (Case C-370/12 Pringle v Government of Ireland, Ireland, The Attorney General EU:C:2012:756, paras 30–37, notably 36) The CJEU can also decide upon the validity of international agreements as well as acts approving the conclusion of international agreements on the basis that international agreements are acts of the Union (Case C-162/96, A Racke GmbH & Co v Hauptzollamt Mainz EU:C:1998:293, para 41; Case C-266/16 The Queen on the application of Western Sahara Campaign UK v Commissioners for Her Majesty’s

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Revenue and Customs and Secretary of State for Environment, Food and Rural Affairs EU:C:2018:118, paras 45 and 50). Various types of questions may be the subject of a reference to the Court of Justice for a preliminary ruling. The Court may be asked what the Treaty or an act of one of the institutions means. It may also be asked whether such an act is valid or not. References may in addition be made on whether a provision of EU law produces direct effect, that is whether it confers rights on private parties (such as individuals and companies) which national courts must protect (see 6.3 on direct effect).

9.2.2 Division of tasks The role of the Court of Justice in the preliminary reference procedure is limited to answering questions of EU law raised in the case pending before the national court. It is for this reason that the Court’s ruling is described as ‘preliminary’. The procedure ‘presupposes that a dispute is actually pending before the national courts’ (Mahmood and Others, para 22). The answers given by the Court are couched in abstract terms because: (a) the Court has to rely on the facts and law presented to it in the request for reference (Case C-475/99 Ambulanz Glöckner and Landkreis Südwestpfalz EU:C:2001:577, para 10); (b) the Court does not ‘rule on the interpretation of national provisions and rule whether the interpretation of the national courts is correct, as such an interpretation falls within the exclusive jurisdiction of the national courts’ (Case C-66/19 JC v Kreissparkasse Saarlouis EU:C:2020:242, para 31); and (c) the application of EU law is not within the power of the Court, as the Court noted in Case 6/64 Costa v ENEL [1964] ECR 585, 592 that Article 267 TFEU ‘gives the Court no jurisdiction … to apply the Treat[ies] to a specific case’. Yet the distinction between interpretation and application is sometimes hard to make. The Court has tried to explain it as follows: When it gives an interpretation of the Treat[ies] in a specific action pending before a national court, the Court limits itself to deducing the meaning of the [European] rules from the wording and spirit of the Treat[ies], it being left to the national court to apply in the particular case the rules which are thus interpreted. (Joined Cases 28–30/62 Da Costa en Schaake NV and Others v Netherlands Inland Revenue Administration [1963] ECR 31, at 38) See Figure 9.2. Division of tasks under Article 267 TFEU Interpretation of EU Law

Application of EU Law

Decision on the validity of EU Law

National courts

CJEU

In case of conflict: authoritative interpretation by CJEU

CJEU

National courts

Figure 9.2 Division of tasks under Article 267 TFEU

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Further, sometimes, owing to the way the question is phrased, the CJEU finds it difficult to interpret the law without applying it to the case. In some instances, the CJEU’s rulings leave the national court with little room for manoeuvre (see, for example, the ‘Arsenal cases’: Arsenal Football Club plc v Matthew Reed [2001] 2 CMLR 23 (ChD); Case C-206/01 Arsenal Football Club plc v Matthew Reed (No 2) [2003] 1 CMLR 13 (ChD); Arsenal Football Club plc v Matthew Reed [2003] 2 CMLR 25 (CA)). In other instances, the Court has not only interpreted the law but also applied it to the extent that it stated that some national rules were incompatible with the EU law (see, for example, the ‘Sunday trading cases’: Case C-145/88 Torfaen Borough Council v B & Q plc [1989] ECR 3851 and Case C-169/91 Council of the City of Stoke-on-Trent v B & Q plc [1992] ECR I-6635). The CJEU might also refer to EU law provisions that were not mentioned by the national court in its questions (Case C-92/02 Kristiansen v Rijksdienst voor Arbeidsvoorziening [2003] ECR I-14597; Case C-105/14 Criminal Proceedings against Taricco and Others EU:C:2015:555). Likewise, the Court may also provide guidance on documents relating to the main proceedings and on written and oral observations submitted to it (Joined Cases C-360/15 and C-31/16 College van Burgemeester en Wethouders van de gemeente Amersfoort v X BV and Visser Vastgoed Beleggingen BV v Raad van de gemeente Appingedam EU:C:2018:44, para 56). Although this might be viewed as an extension of the Court’s power, it is for the benefit of the national court to understand the broader EU context within which the question is asked (see College van Burgemeester en Wethouders van de gemeente Amersfoort, para 55). That being said, the CJEU cannot answer questions that are not asked (Case C-236/02 Slob v Productschap Zuivel [2004] ECR I-1861). It is for the national court to decide questions of national law and questions of fact, and, under the principle of sincere cooperation, to apply the ruling of the Court of Justice to the dispute between the parties (Case 502/19 Junqueras Vies EU:C:2019:1115, para 93). This means that it is the national court, not the Court of Justice, which in the last resort decides whether national law satisfies the requirements of EU law. The CJEU has refused to be involved in any form of implementation or application of the law (Case C-545/18 DP and Finanzamt Linz EU:C:2019:286, paras 27–28). This procedure has only been successful because national courts have accepted to apply the rulings of the Court of Justice and thus complied with the principle of sincere cooperation. This means that the relationship between national courts and the CJEU is based on their voluntary cooperation (see Figure 9.2.). However, at times, some national courts have questioned the principle of primacy and the notion that directives might have direct effect. Recently, both the Supreme Court of Denmark (Case 15/2014, DI, acting on behalf of Ajos A/S v Estate of A, 6 December 2016, translation available on the website of the Supreme Court of Denmark) and the German Constitutional Court (BVerfG, Judgment of the Second Senate of 05 May 2020, DE:BVerfG:2020: rs20200505.2bvr085915, translation available on the website of the German Constitutional Court) have expressly stated that they believed the CJEU’s interpretation of the law to be flawed and refused to use this interpretation. Such an attitude seems to call into question the goodwill of national courts in complying with the CJEU’s judgments. For example, the German Constitutional Court explained that it was in principle bound by the interpretation put forward by the CJEU (para 117) but that, since the CJEU erred in its application of the principle of proportionality and thus the judgment was ultra vires, it had no binding effect on the German Constitutional Court (paras 119; 154; 163).

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9.3 Which ‘national court or tribunal’ can make a reference? This is not an appeal procedure. It is not up to the parties to the dispute to request a preliminary reference but to ‘any court or tribunal of a Member State’ to do so. As the Court highlighted, this is ‘a non-contentious procedure which is completely independent of any initiative by the parties, who are merely invited to state their case within the legal limits laid down by the national court’ (Case C-261/95 Palmisani and Istituto Nazionale della Previdenza Sociale (INPS) EU:C:1997:351, para 31). This means that any court or tribunal within the legal system of a Member State of the EU is entitled to request a preliminary ruling. Naturally, for the purpose of an effective application of Article 267 TFEU, the CJEU had to interpret the concepts of ‘court or tribunal’ and of a court or tribunal ‘of a Member State’, rather than leaving them to the laws of the Member States. At first sight, a direct reference to judicial authorities appears to exclude indirectly administrative authorities (eg the licensing and control authority of a broadcasting authority). Nonetheless, the Court has traditionally taken a relatively broad view on the matter and has not regarded the body’s status under national law as decisive. Whether a national body satisfies that description is a question of EU law for the Court of Justice to determine, as the expression ‘court or tribunal’ is a concept of Union law (Case C-24/92 Corbiau v Administration des contributions EU:C:1993:118, para 15). In fact, the Court of Justice considers the function of the body making the reference rather than its name. What matters is that the authority acts ‘as a third party in relation to the authority which adopted the decision forming the subject-matter of the proceedings’ (Corbiau, para 15). Therefore, a head of administrative services cannot be considered a court or tribunal within the meaning of Article 267 TFEU (see for example Corbiau, paras 16–17). In its assessment, the Court takes account of a number of factors, such as whether the body is established by law, whether it is permanent, whether its jurisdiction is compulsory, whether its procedure is inter partes, whether it applies rules of law and whether it is independent … (Case C-54/96 Dorsch Consult Ingenieurgesellschaft mbH v Bundesbaugesellschaft Berlin [1997] ECR I-4961, para 23) The relevant criteria to be applied in determining whether a body is a court or tribunal may be remembered using the mnemonic EPICAR, that is the body: • must be Established by law • must be Permanent • must be Independent • must have Compulsory jurisdiction • must have an Adversarial procedure (inter pares procedure), and • must apply the Rule of law. As a result, administrative tribunals (Van Gend en Loos; Case C-203/14 Consorci Sanitari del Maresme v Corporació de Salut del Maresme I la Selva EU:C:2015:664), an Appeals Committee for General Medicine (Case 246/80 Broekmeulen v Huisarts Registratie Commissie [1981] ECR 2311) and a University Appeals Board (Case C-407/98 Abrahamsson and Anderson v Fogelqvist [2000] ECR I-5539) have been allowed to request a preliminary ruling, while tribunals established in pursuance of a private contract have not (Case 102/81 Nordsee v Reederei Mond [1982] ECR 1095). As for administrative and financial authorities, it appears that the criterion of independence is the most important one (Case C-210/06 Cartesio Oktató és Szolgáltató bt [2008] ECR I-

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9641, para 57; Case C-53/03 Synetairismos Farmakopoion Aitolias & Akarnanias (Syfait) and Others v GlaxoSmithKline plc and GlaxoSmithKline AEVE [2005] ECR I4609; and Case C-516/99 Schmid [2002] ECR I-4593, para 37). The Court has also applied the expression ‘court or tribunal of a Member State’ to courts in special territories, such as the courts of the Isle of Man (Case C-355/89 DHSS (Isle of Man) v Barr and Montrose Holdings Ltd [1991] ECR-I 3479) or the administrative court of Papeete (Case C-100/89 Kaefer and Procacci v France [1990] ECR I-4647), as well as to courts that are common to more than one Member State, such as the Benelux Court of Justice (Case C-337/95 Parfums Christian Dior v Evora BV [1997] ECR I-6013). These courts may thus also make preliminary references. In contrast, the Complaints Board of the European Schools was deemed not to be such a court because, although it was the body of an international organisation created by the Member States and the Union, it was distinct from both the Union and the Member States (Case C-196/09 Miles and Others v Écoles européennes EU:C:2011:388, paras 37–46).

9.4 Obligation and discretion to refer Article 267, third paragraph TFEU draws a distinction between courts whose decisions are subject to appeal in the national system and courts whose decisions are final (either generally or in the specific case): Where any [preliminary] 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. Generally, lower courts have the discretion whether or not refer a question when there is a point of EU law that needs to be decided. They can either ask for a preliminary ruling, or decide the point for themselves. In principle, a lower national court is the sole judge of whether a reference is necessary and the relevance of the questions put to the Court of Justice. As the Court explained in Case C-2/06 Kempter v Hauptzollamt Hamburg-Jonas [2008] ECR I-411: [T]he system of references for a preliminary ruling is based on a dialogue between one court and another, the initiation of which depends entirely on the national court’s assessment as to whether a reference is appropriate and necessary. (para 42) Indeed, as national courts have direct knowledge of the facts and the case, they are best placed to determine whether a reference is necessary to enable them to adjudicate the matter before them. In particular, the Court stated that it is for the national courts alone, before which the proceedings are pending and which must assume responsibility for the judgment to be given, to decide, having regard to the particular features of each case, as to both the need for a preliminary ruling to enable them to give judgment and the relevance of the questions which they refer to the Court of Justice. (Case C-67/91 Dirección General de Defensa de la Competencia and Asociación Española de Banca Privada (AEB) and Others EU:C:1992:330, para 25; see also slightly amended in X and van Dijk, para 57) The national court should be ‘free to refer to the Court for a preliminary ruling any question that it considers necessary, at whatever stage of the proceedings it considers appropriate’ (Case C-322/16 Global Starnet Ltd v Ministero dell’Economia e delle Finanze and Amministrazione Autonoma Monopoli di Stato EU:C:2017:985, para 22) and not be inhibited (such as the obligation to refer the matter to a constitutional court,

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see Global Starnet Ltd, para 23) or prevented (such as judges being submitted to disciplinary proceedings as a result of making such a reference, see Joined Cases C-558/ 18 and C-563/18 Miasto Łowicz v Skarb Państwa — Wojewoda Łódzki and Rzecznik Praw Obywatelskich v Prokurator Generalny EU:C:2020:234, paras 57–58) by national law from requesting a preliminary reference. The ECJ has adopted a flexible approach (Joined Cases 36 and 71/80 Irish Creamery Milk Suppliers Association v Government of Ireland [1981] ECR 735), giving national courts ‘the widest discretion in referring matters to the Court’ (Ognyanov, para 17), though it has warned of the perils of nonreferral in Case 283/81 Srl CILFIT and Lanificio di Gavardo SpA v Ministry of Health [1982] ECR 3415) (see below). The only instance in which lower courts are obliged to refer the case is when they have doubts as to the validity of an EU law provision. In this case, they are under the duty to refer the case to the CJEU under the Foto-Frost jurisprudence. This is so because, under Article 263 TFEU, the CJEU has exclusive jurisdiction to review the legality of EU acts (Case C-219/17 Berlusconi and Finanziaria d’investimento Fininvest SpA (Fininvest) v Banca d’Italia and Istituto per la Vigilanza Sulle Assicurazioni (IVASS) EU:C:2018:1023, para 42). Furthermore, under Article 23 of the Statute of the CJEU, EU institutions whose acts are challenged can submit written observations to the Court to defend the validity of the acts in question, and the Court can also require any EU institution, bodies, offices and agencies not being parties to a case to supply information deemed necessary for the purpose of that case (see Case C-644/17 Eurobolt BV EU:C:2019:555, para 29). However, it seems that in light of the principle of sincere cooperation, the Court has recently relaxed such an obligation by explaining to national courts that they may avoid making a preliminary reference if they are able to dispel doubts they might have about the validity of an EU act. With this view, national courts are allowed to approach the EU institutions that have taken part in drawing up a piece of secondary EU legislation … in order to obtain specific information and evidence from those institutions …. (Eurobolt BV, para 32)

se

ca ple In Case 314/85 Foto-Frost v Hauptzollamt Lübeck Ost [1987] ECR 4199, the Court held that m national courts had no power to declare EU acts invalid because of the danger that exa measures intended to apply throughout the Member States would be declared invalid in some but not in others. This means that where the validity of an EU measure is seriously questioned in national court proceedings and the issue needs to be resolved in order for the national judgment to be given, then a reference to the Court of Justice must be made. This is so regardless of whether or not the national court is one whose decisions are subject to appeal. Clearly, this approach has the merit of avoiding contradictory decisions between the CJEU and national courts and also between national courts. Moreover this approach contains a strong integrating element as it ensures the uniform and effective application of EU law, which is the aim of Article 267 TFEU. The only exception, where the Court of Justice has been prepared to recognise the power of national courts to suspend provisionally the validity of EU acts, is where the national court has been asked to grant provisional relief pending final judgment in the case. The urgency of such cases might make it impractical to wait for a preliminary ruling, so the Court of Justice has accepted that national courts may declare EU acts invalid in such circumstances, provided a number of strict conditions are met. In Joined Cases C-143/88 and 92/89 Zuckerfabrik Süderdithmarschen AG v Hauptzollamt Itzehoe [1991] ECR I-415, the Court explained:

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Suspension of enforcement of a national measure adopted in implementation of a [Union] regulation may be granted by a national court only: (i) if that court entertains serious doubts as to the validity of the [Union] measure and, should the question of the validity of the contested measure not already have been brought before the Court, itself refers that question to the Court; (ii) if there is urgency and a threat of serious and irreparable damage to the applicant; and (iii) if the national court takes due account of the [Union’s] interests. (para 33) In contrast, courts whose judgments are final have no discretion: they must refer such points to the Court of Justice. Indeed, if the case is pending before a court or tribunal of a Member State against whose decisions there is no judicial remedy under national law – for example the Supreme Court (UK), the Cour de Cassation (France), the Bundesgerichtshof (Germany) – that court or tribunal shall bring the matter before the Court of Justice (see eg Global Starnet Ltd, para 24). The purpose of this rule is to prevent the emergence of a body of national case law that is not in accordance with EU law (Case 107/76 Hoffmann La Roche v Centrafarm [1977] ECR 957), para 5; Case C416/17 Commission v France EU:C:2018:811, para 109). In Case C-99/00 Criminal proceedings against Lyckeskog [2002] ECR I-4839, the ECJ explained: Decisions of a national appellate court which can be challenged by the parties before a supreme court are not decisions of a ‘court or tribunal of a Member State against whose decisions there is no judicial remedy under national law’ within the meaning of Article [267 TFEU]. The fact that examination of the merits of such appeals is subject to a prior declaration of admissibility by the supreme court does not have the effect of depriving the parties of a judicial remedy. That is so under the Swedish system. The parties always have the right to appeal to the Högsta domstol [Supreme Court] against the judgment of a hovrätt [Court of Appeal], which cannot therefore be classified as a court delivering a decision against which there is no judicial remedy. Under Paragraph 10 of Chapter 54 of the Rättegångsbalk [Code of Procedure], the Högsta domstol may issue a declaration of admissibility if it is important for guidance as to the application of the law that the appeal be examined by that court. Thus, uncertainty as to the interpretation of the law applicable, including [Union] law, may give rise to review, at last instance, by the supreme court. If a question arises as to the interpretation or validity of a rule of [Union] law, the supreme court will be under an obligation, pursuant to the third paragraph of Article [267 TFEU], to refer a question to the Court of Justice for a preliminary ruling either at the stage of the examination of admissibility or at a later stage. (paras 16–18) There are only three instances when a court’s Treaty obligation to refer a case to the CJEU is waived (CILFIT, para 21; Case C-160/14 Ferreira da Silva e Brito and Others v Portugal EU:C:2015:565, para 38; Commission v France, para 110): (a) when the question raised is irrelevant; (b) when the question is ‘materially identical’ to a question that has already been addressed in a previous preliminary ruling (eg in Da Costa a question identical to one raised in Van Gend en Loos was asked), or when the CJEU has already dealt with the point of law in question (CILFIT). The Court will deal with this type of

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request only if there are new facts or new arguments presented by the national court (Da Costa). As a result, a system of precedent is emerging by default. This also shows that national courts are part of a network of courts enforcing EU law. In X v Inspecteur van Rijksbelastingdienst and van Dijk v Staatssecretaris van Financiën EU:C:2015:564, the Court dealt with a case where a national court against whose decision there was no judicial remedy asked whether it was obliged to refer if the question was similar to the one raised by a lower court and concerned the exact same legal issue and to which no answer had yet been given by the Court. In this case, the Court accepted that that national court was not obliged to either refer the question to the Court or wait until an answer was given (paras 61–63). This seems to be a relaxation of earlier jurisprudence. It must be noted that sometimes the concept of acte éclairé is used in relation to the Da Costa jurisprudence as it appears in national courts’ questions for preliminary rulings (see eg in Lyckeskog, question 2) and in the opinions or views of Advocates General (see eg Case C-495/03 Intermodal Transports BV v Staatssecretaris van Financiën EU:C:2005:215, Advocate General Opinion, para 74; Opinion 2/13, 9.1 above, View of Advocate General, para 129). That being said, it seems that the concept of acte éclairé is in some instances used solely in relation to the Da Costa jurisprudence (see eg Intermodal Transports BV, para 74) but in others it is conflated with the acte clair doctrine (see below). The only time when the Court engaged with the concept, though indirectly, was in the context of the Da Costa jurisprudence to which it alluded indirectly by referring to paras 13-15 of CILFIT (Cases C-58/13 and C-59/13 Torresi and Torresi v Consiglio dell’Ordine degli Avvocati di Macerata EU:C:2014:2088, para 32); (c) when, under the acte clair doctrine, the ‘correct application … 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’ (known as acte clair in French administrative law) (CILFIT, para 16, see 9.4 above; and Article 99 of the 2012 Rules of Procedure of the Court of Justice). Before reaching that conclusion, the national court has to be convinced that the matter would be equally obvious to the courts of other Member States and to the Court of Justice (para 16). It should be added that the doctrine of acte clair not only applies to acts of the institutions but also to judgments of the Court (see for example Commission v France). In carrying out this interpretation, the national court must bear in mind (1) the different languages that are all authentic in which the provision is drafted, (2) the peculiarity of the terminology used in EU law, and (3) the context in which the provision is set, taking into account the objectives of the provision and the evolution of its interpretation (CILFIT, paras 18–20). In more recent cases, the Court has, however, failed to refer specifically to or apply these criteria and to mention the need to ensure that the interpretation is equally obvious to another national court (see eg Ferreira da Silva). The Court has seemingly relaxed the conditions, allowing a national court to use the acte clair exception, or at least hinted that they are not all mandatory. The recent jurisprudence is unfortunately confusing. In some cases, none of the three criteria appear, but there is reference to the conviction that the matter is equally clear to national courts (eg Commission v France, para 111); in other instances one of the criteria (the third one) appears together with the conviction that the matter is equally clear to national courts (eg Case C-379/15 Association France Nature Environnement v Premier minister and Ministère de l’Écologie, du Développement durable et de

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l'Énergie EU:2016:603, paras 48–49). Furthermore, Ferreira da Silva seems to include two (new) criteria: if ‘[1] there are conflicting decisions of lower courts or tribunals regarding the interpretation … and [2] [the interpretation] frequently gives rise to difficulties of interpretation in the various Member States’ then the doctrine of acte clair cannot be used and the national court of last instance is obliged to make a reference (para 45). It is, however, unclear whether this jurisprudence will be followed by the Court since, as of now, the Court has not used this phrasing again. Another interesting development of jurisprudence appears in X and van Dijk (see discussion under point (b)) as the Court expressly referred to the acte clair doctrine (para 56). After all, if the matter has already been decided, the correct application of EU law is ‘so obvious as to leave no scope for any reasonable doubt’. Yet, the Court pointed out that the sole fact that a lower national court has asked the same question does not prevent the upper court from deciding that the case involves an acte clair (para 60). For a summary of when a question must be referred, see Figure 9.3. Questions materially identical or already dealt with by CJEU (Da Costa)

Acte clair doctrine

Question is irrelevant

CILFIT Courts of last resort

unless

Obligation to refer

Foto-Frost unless

Courts of first instance

No obligation to refer

Figure 9.3 Courts having an obligation to refer under Article 267 TFEU

in practice As EU law is valid in all its authentic languages, it is sometimes difficult for national courts to interpret it. In Case 9/79 Wörsdorfer, née Koschniske v Raad van Arbeid EU:C:1979:201, Article 10 of Regulation 574/72 (OJ L74/1) read in Dutch ‘diens echtgenote’ which can be translated as ‘whose wife’ in English. The national court thus asked whether this provision which in Dutch gave the impression that it referred exclusively to a person of the female sex could also apply to a married man. The Court, comparing the Dutch version of the regulation with other versions in eg German, French, English, Italian, drew the conclusion that the word was to be interpreted so as to apply equally to male and female workers (paras 5–9). This example illustrates the difficulty that a national court might encounter when applying the acte clair doctrine.

The Court has added that when verifying whether national courts of last instance have an obligation to refer, they ought to take account of the characteristic features of EU law, the special difficulties to which its interpretation gave rise and the risk of divergences in judicial decisions (CILFIT, para 21; Intermodal Transports BV, para 33; Ferreira da Silva, para 39). National courts against whose decision there is no judicial remedy are therefore given some leeway in interpreting EU law.

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In other words, national courts take upon themselves the responsibility for determining whether they are obliged to request a preliminary ruling (in relation to the acte clair; see X and van Dijk, para 59). The Court has, however, warned of the consequences of failing to refer the matter to the Court. First, a court of last instance can be subject to the State liability rules under the Köbler jurisprudence (see 7.3.2). Yet, it should be noted that State liability in case of judicial errors is viewed by the Commission as ‘only a remedy of last resort’ (see Global Starnet Ltd EU:C:2017:442, Advocate General Opinion, para 20). After all, it serves the purpose of securing uniform interpretation of EU law (paras 20–21). Second, the Commission can start proceedings against a State under Article 258 TFEU (see 7.2). In both instances, the European Union institutions were initially reluctant to act against national courts. Starting in 2003 with Köbler, the Court has developed a rich jurisprudence on the liability of national courts, dismissing the arguments that it would affect the independence of the judiciary or diminish the authority of the adjudicating court (Köbler, paras 42–43). In 2017, the Commission brought the first case under Article 258 TFEU against a State as one of its courts of last instance (Conseil d’État) was, according to the Commission, not entitled to interpret EU law without first making a request for a preliminary ruling (Commission v France (above), para 105). The Court sided with the Commission, agreeing that, as the interpretation of the law was not so obvious as to leave no scope for doubt (use of the acte clair doctrine), France had violated Article 267 TFEU via its highest administrative court (para 114). It should be stressed that both mechanisms are available not only when a national court against whose decisions there is no remedy fails to refer a question to the CJEU but also when it does not apply the answer provided by the Court.

9.5 Can the Court of Justice of the European Union refuse to hear a preliminary reference? Article 267, second paragraph TFEU stipulates: Where such a question [preliminary reference] is raised before any 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 to give a ruling thereon. The Court explained in Case C-379/98 PreussenElektra AG v Schhleswag AG [2001] ECR I-2099: It should remembered that it is settled law that in the context of the cooperation between the Court of Justice and the national courts provided for by Article [267] of the Treaty it is solely for the national court before which the dispute has been brought, and which must assume responsibility for the subsequent judicial decision, to determine in the light of the particular circumstances of the case both the need for a preliminary ruling in order to enable it to deliver judgment and the relevance of the questions which it submits to the Court. Consequently, where the questions submitted by the national court concern the interpretation of [Union] law, the Court of Justice is, in principle, bound to give a ruling. (para 38) The Court originally took a very liberal attitude to questions referred to it, reformulating them if they were badly drafted or missed the point, and doing its best to establish the background from the material submitted to it where this had not been explained adequately by the national court. This helped to establish a good working relationship with national judges and encouraged them to make use of the procedure.

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More recently, the growing volume of cases has led the Court to take a stricter approach. First, it has issued recommendations to the national courts and tribunals in relation to the initiation of preliminary rulings proceedings (2019/C 380/01), which contain a wealth of information concerning, notably, the subject matter and scope of the request for a preliminary ruling (paras 8–11), the stage at which to submit a reference for a preliminary ruling (paras 12–13), the form and content of the request for a preliminary ruling (paras 14–20) and the protection of personal data and anonymisation of the request for a preliminary ruling (paras 21–22). (See also Article 94 of the Consolidated 2012 Rules of Procedure of the Court of Justice, [2012] OJ L265/1, as amended in 2013, 2016 and 2019.) Secondly, although questions on the interpretation of EU law enjoy a presumption of relevance (see Case C-355/97 Landesgrundverkehrsreferent der Tiroler Landesregierung v Beck Liegenschaftsverwaltungsgesellschaft mbH, and Bergdorf Wohnbau GmbH EU:C:1999:391, para 22), the CJEU has stated that: it has no jurisdiction to give a preliminary ruling on a question submitted by a national court where it is quite obvious that the interpretation of [Union] law sought by that court bears no relation to the actual facts of the main action or its purpose … or where the problem is hypothetical and the Court does not have before it the factual or legal material necessary to give a useful answer to the questions submitted to it …. (Case C-415/93 Union royale belge des sociétés de football association ASBL v Bosman, Royal club liégeois SA v Bosman and Others and Union des associations européennes de football (UEFA) v Bosman EU:C:1995:463, para 61; see also, slightly amended, in Case C-495/19 Kancelaria Medius SA v RN EU:C:2020:431, para 22) In practice, the Court has refused to look into the following situations: (a) EU law was not applicable at the relevant time, notably because the situation happened in a State that was not yet a member of the European Union (Case C302/04 Ynos kft v János Varga EU:C:2006:9, para 36) or a party to the Agreement on the European Economic Area (Case C-321/97 Andersson and WåkeråsAndersson EU:C:1999:307, para 31). (b) The dispute is not connected with any of the situations contemplated by the Treaty provisions or EU acts and so national courts are not required to apply EU law to solve the dispute (Łowicz and Prokurator Generalny (9.4 above), paras 49 and 52). As the CJEU has no jurisdiction with regard to national legislation lying outside the scope of EU law, it cannot answer the request of the national court (Case C-299/95 Kremzow v Austria [1997] ECR I-2629) unless the solutions adopted on the national level in fields outside the scope of the EU measures are similar to those adopted at EU level. The justification for this approach is that it forestalls future differences of interpretation (Case C-310/10 Ministerul Justiţiei și Libertăţilor Cetăţenești v Agafiţei and Others EU:2011:467, para 39). For example, in Europamur Alimentación SA, as the Court pointed out that the Ordenación del Comercio Minorista, ie the law regulating retail commerce, contained provisions that were a transposition of the Unfair Commercial Practices Directive or were based on that Directive, it had jurisdiction to answer the question referred (Case C-295/16 Europamur Alimentación SA v Dirección General de Comercio y Protección del Consumidor de la Comunidad Autónoma de la Región de Murcia EU:C:2017:782, para 31).

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(c) There is no real dispute between the parties (Case 104/79 Foglia v Novello (No 1) [1980] ECR 745 and Case 244/80 Foglia v Novello (No 2) [1981] ECR 3045). In other words, the dispute is ‘contrived and artificial’, the dispute is spurious and the dispute is an abuse of procedure by the parties. In its recent jurisprudence, the Court has been reticent to look into this matter and has preferred to leave such assessment to national courts (Case C-62/14 Gauweiler and Others v Deutscher Bundestag EU:C:2015:400, para 26). (d) The case is hypothetical (Case 138/80 Borker [1980] ECR 1975; Case C-83/91 Meilicke v ADV/ORGA FA Meyer AG [1992] ECR I-4871) or the application of EU law to the case is hypothetical (Case C-16/12 Hermes Hitel és Faktor Zrt v Nemzeti Földalapkezelö Szervezet EU:C:2012:426). After all, the procedure does not enable ‘advisory opinions on general or hypothetical questions to be delivered’ as its very aim is to assist in the ‘effective resolution of a dispute’ (Łowicz and Prokurator Generalny, para 44). (e) The question is irrelevant to the actual case (Case C-318/00 Bacardi-Martini SAS, Cellier des Dauphins v Newcastle United FC [2003] ECR I-905; CILFIT, 9.4 above; Case C-147/02 Alabaster v Woolwich plc and Secretary of State for Social Security [2004] ECR I-3101). (f) The court cannot understand the question (Joined Cases C-320–322/90 Telemarsicabruzzo SpA and Others v Circostel and Others [1993] ECR I-393). (g) The court deems that there is not enough information (Case C-176/96 Lehtonen, Castors Canada Dry Namur-Braine ASBL v Fédération Royale Belge des Sociétés de Basket-ball ASBL (FRBSB) [2000] ECR I-2681). As the Article 267 TFEU procedure is one based on cooperation between national courts and the CJEU, the latter expects to be provided by the former with the factual and legal framework in which the question is asked (Case C-75/12 Criminal proceedings against Abdel [2012] OJ C303/15). However, in Case C-316/93 Vaneetveld v Le Foyer SA and Le Foyer SA v Fédération des Mutualités Socialistes et Syndicales de la Province de Liège [1994] ECR I-763, the Court admitted: It is true that the Court has held that the need to arrive at an interpretation of [Union] law which is useful for the national court requires that court to define the factual and legislative context of the questions, or at least to explain the factual hypotheses on which they are based … None the less, that requirement is less pressing where the questions relate to specific technical points and enable the Court to give a useful reply even where the national court has not given an exhaustive description of the legal and factual situation. (para 13) (h) The validity of judgments of the CJEU is questioned (Case C-69/85 Wünsche Handelsgesellschaft GmbH & Co v Germany [1986] ECR 947). (i) The CJEU has already dealt with the question on a previous occasion (CILFIT, 9.4 above; Case C-466/93 Atlanta Fruchthandelsgesellschaft mbH and Others v Bundesamt für Ernährung und Forstwirtschaft [1995] ECR I-3799 and Da Costa; and Article 99 of the 2012 Rules of Procedure of the Court of Justice). (j) The answer to the question raised is clear (see 9.4). (k) Proceedings in the national court are already terminated (Case 338/85 Fratelli Pardini SpA v Ministero del Commercio con l’Estero [1988] ECR 2041). (l) One of the parties has withdrawn from the proceedings and it is therefore no longer necessary to give a ruling (Joined Cases C-422–424/93 Zabala Erasun and others v Instituto Nacional de Empleo [1995] ECR I-1567).

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See Figure 9.4 below. EU law not applicable at the time (Ynos kft) No relation to EU law (Kremzow) No dispute between the parties (Foglia) Case hypothetical (Meilicke) Question irrelevant to the case (Bacardi-Martini) CJEU refuses to deal with a question

Court does not understand the question (Telemarsicabruzzo) Not enough information provided (Lehtonen) Validity of judgments of the CJEU (Wünsche) Court has already dealt with the question (Da Costa)

Acte clair (CILFIT) Proceedings terminated in national court (Pardini) Parties withdrawn from proceedings (Zabala Erasun and Others)

Figure 9.4 Grounds on which the CJEU may refuse a referral

9.6 The special preliminary ruling procedures In pursuance of Article 23a of Protocol No 3 on the Statute of the Court of Justice of the European Union, there are two special preliminary ruling procedures: (a) the expedited procedure; and (b) the urgent procedure. Both are dealt with in chapters 2 and 3 of Title III of the 2012 Rules of Procedure of the Court of Justice. Under these procedures the case may be decided, within a short time, without a written submission from the Advocate General, that is the submission may be made orally. The use of the expedited preliminary ruling procedure, described in Articles 105 to 106 of the Rules of Procedure of the Court of Justice, may be requested by the referring court or tribunal or, on his own motion, by the President of the Court after hearing the Judge-Rapporteur and the Advocate General. In 2019 the CJEU registered a record number of such requests, but out of 58 only 11 were accepted (Annual Report 2019 – Judicial Activity, 154). A strict time limit for the submissions is then set, and the President may request submissions to focus on the essential points of law raised in the reference. An example of such procedure was Case C-698/15 Watson and Others EU:C:2016:70 which was sought by the Court of Appeal (England & Wales) (Civil

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Division) on 28 December 2015 and accepted by the Court of Justice on 1 February 2016. More recent examples include: a request for a preliminary ruling from the Scottish Court of Session on the interpretation of Article 50 TEU, notably the right and conditions of unilateral revocation of the notification by a Member State of its intention to withdraw from the European Union (Case C-621/18 Wightman and Others v Secretary of State for Exiting the European Union EU:C:2018:999, paras 18 and 19); and a request by the Supreme Court of Spain which was approved by the CJEU on the basis that the individual was in provisional detention when the preliminary reference was made and the answers of the CJEU would have an impact on the individual’s continued detention (Case 502/19 Junqueras Vies EU:C:2019:1115, paras 43 to 45). On average, expedited procedures last 9.9 months (Annual Report 2019 – Judicial Activity, 172). The urgent preliminary ruling procedure, which was introduced in 2008, may be used only for issues covered by Title V of Part III of the TFEU, that is, the area of freedom, security and justice. It can be triggered either by the referring court or tribunal submitting a request for the urgent procedure to be applied, or, failing that, by the President of the Court of Justice, if ‘the application of that procedure appears, prima facie, to be required’, in which case a Court Chamber will consider whether or not it is necessary to deal with the reference under that procedure (Article 107(3) of the Rules of Procedure). When submitting such a request, the referring court or tribunal will have to explain why this procedure is required and, ideally, propose its own answer to the questions referred (Article 107(2) of the Rules of Procedure). A decision as to the urgency of the procedure will then have to be made by the designated chamber (Article 108 of the Rules of Procedure) before ruling on the substance after hearing the Advocate General (Article 112 of the Rules of Procedure). Should the application of the urgent procedure be deemed unnecessary, the normal reference procedure will continue to apply (Article 109(6) of the Rules of Procedure). In 2019, the urgent preliminary ruling procedure was requested in 20 cases but only granted in three (Annual Report 2019 – Judicial Activity, 154) and completed within 3.7 months on average (Annual Report 2019 – Judicial Activity, 172).

9.7 The effects of the ruling of the Court of Justice of the European Union As the role of preliminary rulings is to assist national courts, they are not legally binding on the parties. It must be remembered that, as the Court explained in Kempter (9.4 above), ‘a preliminary ruling does not create or alter the law but is purely declaratory, with the consequence that in principle it takes effect from the date on which the rule interpreted entered into force’ (para 35; see also Case C-417/13 ÖBB Personenverkehr AG v Starjakob EU:C:2015:38, para 63). In this light, the ruling of the CJEU ‘is binding on the national court as to the interpretation of the [Union] provisions and acts in question’ (Case 52/76 Benedetti v Munari Fratelli SAS [1977] ECR 163, para 26). The national court must, within the exercise of its jurisdiction, give full effect to the interpretation of EU law provided by the CJEU, which means that it might have to refuse to apply conflicting national provisions (Ognyanov (9.1 above), para 34) or to alter established case law that is based on an incorrect interpretation of EU law (Ognyanov, para 35).

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Furthermore, the ruling affects all legal relationships, whether established before or after the ruling. The Court clearly explained in Case 61/79 Amministrazione delle Finanze dello Stato v Denkavit Italiana [1980] ECR 1205 that a preliminary ruling on the interpretation of a rule of Union law … clarifies and defines where necessary the meaning and scope of that rule as it must be or ought to have been understood and applied from the time of its coming into force. It follows that the rule as thus interpreted may, and must, be applied by the [national] courts even to legal relationships arising and established before the judgment ruling on the request for interpretation … (para 16) The CJEU has nevertheless acknowledged that exceptionally, where legal certainty requires it, it is acceptable to restrict the possibility for all persons concerned of relying on the Court’s interpretation of an EU provision. In Case C-577/08 Rijksdienst voor Pensioenen v Brouwer [2010] ECR I-7489, the Court acknowledged that [i]n addition to the existence of a risk of serious economic repercussions due in particular to the large number of legal relationships entered into in good faith on the basis of rules considered to be validly in force, an additional factor to take into account to justify the limitation of the temporal effects of the judgment is the existence of significant objective uncertainty regarding the implications of [Union] provisions. (para 36) That being said, the Court has specified that financial consequences resulting from the preliminary ruling do not solely justify limiting the temporal effects of the ruling (Case C-209/03 R, on the application of Bidar v London Borough of Ealing and Secretary of State for Education and Skills [2005] ECR I-2119, para 68) as this would diminish the judicial protection of the rights individuals have under EU law (Case C-35/97 Commission v France [1998] ECR I-5325, para 52). Further references regarding the same case are allowed by the national court, as the Court explained in Case 14/86 Pretore di Salò v Persons unknown [1987] ECR 2545: … the fact that judgments delivered on the basis of references for a preliminary ruling are binding on the national courts does not preclude the national court to which such a judgment is addressed from making a further reference to the Court of Justice if it considers it necessary in order to give judgment in the main proceedings. Such a reference may be justified when the national court encounters difficulties in understanding or applying the judgment, when it refers a fresh question of law to the Court, or again when it submits new considerations which might lead the Court to give a different answer to a question submitted earlier. (para 12) The preliminary ruling must also be taken into consideration by all courts in all Member States of the EU (Case 66/80 International Chemical Corporation v Amministrazione delle Finanze [1981] ECR 1191) and may be treated as authoritative though not legally binding upon them. This is explained by the fact that the ruling is meant to declare and interpret pre-existing law. In the case of an EU act being declared invalid, the CFI explained in Case T-220/97 H & R Ecroyd Holdings Ltd v Commission [1999] ECR II-1677 that … [the Court’s] decision has the legal effect of requiring the competent [Union] institutions to adopt the measures necessary to remedy that illegality … In those circumstances, they are to take the measures that are required in order to comply with the judgment containing the ruling in the same way as they are, under

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Article [266 TFEU], in the case of a judgment annulling a measure or declaring that the failure of a [Union] institution to act is unlawful … [W]hen a [Union] measure is held to be invalid by a preliminary ruling, the obligation laid down by Article [266 TFEU] applies by analogy. (para 49)

9.8 Further reading Anagnostaras AG, ‘Preliminary Problems and Jurisdiction Uncertainties: The Admissibility of Questions Referred by Bodies Performing Quasi-Judicial Functions’ (2005) 30 EL Rev 878. Bermann GA, ‘New Frontiers in the Relationship between National and European Courts’ (2008-2009) 32 Fordham International Law Journal 525. Bobek M, ‘Learning to Talk: Preliminary Rulings, the Courts of the Member States and the Court of Justice’ (2008) 45 CML Rev 1611. Broberg M, ‘The Preliminary Reference Procedure and Questions of International and National Law’ (2009) 28 Yearbook of European Law 362. Broberg M and Fenger N, Preliminary References to the European Court of Justice, 2nd edn (OUP, 2014). Broberg M, ‘Preliminary References as a Means for Enforcing EU Law’ in Jakab A and Kochenov D (eds), The Enforcement of EU Law and Values: Ensuring Member States’ Compliance (OUP, 2017) 99. Komarek J, ‘In the Court(s) we Trust? On the Need for Hierarchy and Differentiation in the Preliminary Ruling Procedure’ (2007) 32 EL Rev 467. Kornezov A, ‘The New Format of the acte clair Doctrine and its Consequences’ (2016) 53 CML Rev 1317. Lacchi C, ‘Multilevel Judicial Protection in the EU and Preliminary References’ (2016) 53 CML Rev 679. Lenaerts K, ‘The Rule of Law and the Coherence of the Judicial System of the European Union’ (2007) 44 CML Rev 1625. Lenz CO, ‘The Role and Mechanism of the Preliminary Ruling Procedure’ (1994) 18 Fordham International Law Journal 388. Limante A, ‘Recent Developments in the Acte Clair Case Law of the EU Court of Justice: Towards a More Flexible Approach’ (2016) 54 JCMS 1384. Lord Mance, ‘The Interface between National and European Law’ (2013) 38 EL Rev 437. Tridimas T, ‘Knocking on Heaven’s Door: Fragmentation, Efficiency and Defiance in the Preliminary Reference Procedure’ (2003) 40 CML Rev 9. Tridimas T, ‘Constitutional Review of Member State Action: The Virtues and Vices of an Incomplete Jurisdiction’ (2011) 9 ICON 737. Wahl N and Prete L, ‘The Gatekeepers of Article 267 TFEU: On Jurisdiction and Admissibility of References for Preliminary Rulings’ (2018) 55 CML Rev 511.

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ry ma sum

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Provided certain requirements are fulfilled, the preliminary ruling procedure enables national courts and tribunals to ask the CJEU to interpret EU Treaties and acts, as well as to determine the validity of EU acts. Unless their judgment is final, national courts have discretion to determine whether it is necessary or not to make a referral to the CJEU. This is not deemed necessary when the CJEU has already answered the question, or where the answer to the question is so obvious as to leave no room for doubt. Because the CJEU does not act as an appeal court and does not deal with the facts of the case pending before the referring court, its answer is formulated in abstract terms so as to leave the concrete application of the law to the national court.

Test Your Knowledge

You are the chair of a professional arbitration tribunal that deals with complaints stemming from members of the Association of Chiropractors. Decisions of this tribunal are legally binding. Next week you are to hear a case brought by a disabled employee involving an allegation of discrimination, contrary to a recently enacted domestic Utopian law that was passed to implement an (imaginary) EU Directive. The employee concerned is being supported by a pressure group, because it is hoped that the case will publicise the issue of disabled rights. The employer concerned is a medium size private company. The company’s lawyer is apparently intending to raise questions about the validity of the EU Directive and the legal definition of ‘disability’ in the Directive. There is a right of appeal from decisions of the Tribunal to the Employment Appeal Tribunal, but only on a point of law. 1 2 3 4 5

Are you entitled to make a request for a preliminary reference? If so, are you obliged to make such a request? Would your answer to the questions above differ if the CJEU had already given a judgment on the meaning of the term ‘disability’ in the Directive? At which stage of the proceedings would it be best to make such a request? If you were to use your powers, how would you formulate your request to ensure that you are provided with an adequate answer? What kind of answer do you expect from the CJEU?

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After reading this chapter, you will be able to understand: • the different judicial actions available to ensure that EU institutions act in compliance with the Treaties • the judicial review process and the hurdles faced by individuals in seeking such review • the possibility of invoking a plea of illegality while proceedings are engaged under another procedure • the opportunity for institutions and individuals to spur the EU into action by alleging that it has failed to act despite its obligation to do so • the conditions under which the EU’s extra-contractual liability is engaged.

10.1 Introduction The TFEU gives the EU institutions wide powers to adopt legislation. As a result, it would have been incompatible with the legal traditions of the Member States and with the rule of law for these powers to escape judicial control. Whilst it is hoped that they carry out their functions in the way specified in the Treaty and according to general principles of EU law (see Article 13(1) and (2) TEU), the possibility remains that they may act beyond their limited competences. To avoid this, Article 263 TFEU provides for a procedure for judicial review, and Article 277 TFEU allows a plea of illegality in proceedings engaged on a basis different from Article 263 TFEU. Furthermore, to oblige EU institutions to comply with their Treaty obligations, it is possible to lodge a complaint for failure to act under Article 265 TFEU. In cases where the EU institutions’ actions and omissions have led to damage, individuals and institutions alike can have recourse to Article 340 TFEU and claim compensation.

10.2 Annulment of EU acts Article 263 TFEU establishes a procedure known as the action for annulment, under which the CJEU may review the legality of any acts adopted by other institutions that are intended to have legal effects. It confers upon the CJEU the ‘exclusive jurisdiction to review the legality of acts adopted by the EU institutions’ (Case C-219/17 Berlusconi and Finanziaria d’investimento Fininvest SpA (Fininvest) v Banca d’Italia and Others EU:C:2018:1023, para 42), thus offering legal protection to those who are adversely affected by instruments that are or may be in fact illegal.

10.2.1 Reviewable acts According to Article 263, first paragraph TFEU:

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The Court of Justice of the European Union shall review the legality of legislative acts, of acts of the Council, of the Commission and of the European Central Bank, other than recommendations and opinions, and of acts of the European Parliament and of the European Council intended to produce legal effects vis-àvis third parties. It shall also review the legality of acts of bodies, offices or agencies of the Union intended to produce legal effects vis-à-vis third parties. In other words, the following acts may be challenged: (a) legislative acts of the European Parliament and Council, acts of the Council, of the Commission and of the European Central Bank in the form of regulations, directives and decisions, but not recommendations or opinions since they are not intended to have legally binding force; (b) acts of the European Parliament and the European Council that have legal effects on third parties; (c) acts of bodies, offices and agencies that have legal effects on third parties. With the obvious exception of the CJEU, the scope of judicial review covers the institutions listed in Article 13(1) TEU and the Committee of the Regions (see 2.3– 2.6). Article 263 TFEU also covers acts of bodies, offices and agencies of the European Union (see 2.6). For example, in Fertisac SL, the applicant challenged a decision by the European Chemicals Agency (Case T-855/16 Fertisac SL v European Chemicals Agency EU:T:2018:118). Acts of auxiliary bodies such as the Coreper (see 2.3.2) are also challengeable ‘where [they are] intended, as such, to produce legal effects and therefore [fall] outside the framework of [the Coreper’s] preparation and implementation function’ (Joined Cases C-626/15 and C-659/16 Commission v Council EU:C:2018:925, para 61). It should be noted that the CJEU does not have the power to review acts adopted by national authorities unless they are preparatory to a decision of an EU institution (Berlusconi, paras 50 and 59). In fact, all acts and measures that are intended to have legally binding force, whatever their nature and form, may be reviewed (Case 22/70 Commission v Council (ERTA) EU:C:1971:32, para 42; Case C-621/16 P Commission v Italy EU:C:2019:251, para 44). Oral decisions can also be challenged but provided the applicant can establish the existence of such a decision (Case T-562/12 Dalli v Commission EU:T:2015:270, para 67). The reason adduced for such a broad interpretation is that as the EU is based on the rule of law, all measures producing legal effects must be amenable to judicial review (see Joined Cases C-626/15 and C-659/16 Commission v Council, para 61). For example, whilst Article 263 TFEU expressly states that recommendations and opinions cannot be challenged, the CJEU has reviewed such acts on the basis that they might be legally binding (see eg Case C-16/16 P Belgium v Commission EU:C:2018:79). Likewise, oral decisions whose effects are legally binding can be challenged. For example, in Dalli, the Court explained that as the request by President Barroso made to Mr Dalli to resign was not based on the Commission President’s powers under Article 17(6) TEU, ie he was not dismissed (see 2.3.1.1), it was not legally binding (Case T-562/12 Dalli v Commission EU:T:2015:270, para 152). Indeed, the CJEU has explained that any measure the legal effects of which are binding on, and capable of affecting the interests of, the applicant by bringing about a distinct change in his legal position is an act or decision which may be the subject of an action under Article [263]. (Case C-60/81 International Business Machines Corporation (IBM) v Commission EU:C:1981:264, para 9)

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In other words, the applicant must demonstrate that (1) the measure has changed his legal position, and (2) the change is definitive. To determine whether the measure has altered the legal position of the applicant, the CJEU uses the following objective criteria (Case C-31/13 P Hungary v Commission EU:C:2014:70, para 55): (a) the contents of the measure: the CJEU will examine the wording, the content and the purpose of the measure, as well as the context of which it forms part (Case C16/16 P Belgium v Commission, para 37); (b) the context in which the measure was adopted: this can assist in identifying the purpose of the measure. In Case T-721/14 Belgium v Commission EU:T:2015:829, the General Court noted that the recommendation concerned was the result of discussions between the Council, the European Parliament and the Commission (para 36); and (c) the powers of the institution that adopted the measure: the CJEU works on the assumption that if the institution does not have the power to adopt such an act, it is unlikely to be legally binding (Joined Cases C-593/15 and C-594/15 P Slovak Republic v Commission EU:C:2017:800, para 64). For example, in Mallis (Joined Cases C-105/15 P to C-109/15 P Mallis and Others v Commission and ECB EU:C:2016:702), a statement by the Eurogroup indicating that an agreement had been reached with Cyprus and welcoming restructuring plans of the financial sector in an annex was deemed not to produce any legal effects because the decision was informative (para 59), as neither the Commission nor the ECB intended ‘to create a legal obligation on the Member State’ (para 58) and the statement could not ‘be considered the expression of a decision-making power of those two EU institutions’ (para 57). In some instances, the CJEU has also taken into account subjective criteria, such as the intention of the author of the act (Case C-521/06 P Athinaïki Techniki v Commission, EU:C:2008:422, para 42). However, this factor is ‘only of subsidiary importance and does not take precedence over the examination of objective criteria’ (Case T-283/15 Esso Raffinage v European Chemicals Agency EU:T:2018:263, para 75). Examples of changes in applicants’ legal position include the loss of a legal status (see eg Joined Cases C-183/17 P and C-184/17 P International Management Group v Commission EU:C:2019:78, para 59). The CJEU also assesses whether the change in the applicant’s legal position is definitive. Generally, acts adopted according to an internal procedure are not open to challenge as they do not lay down the author’s definite position, but rather are paving the way towards a final decision. Therefore, preparatory measures, such as the initiation of a procedure, a statement of objections (IBM, para 21), and the decision authorising the Commission to open the negotiations with the United Kingdom (including the negotiating directives) with regard to the Withdrawal Agreement (Case T-458/17 Shindler v Council EU:T:2018:838, paras 44–46 confirmed in Case C-755/18 P Shindler and Others v Council EU:C:2019:221, paras 29–31), are not reviewable acts as they do not alter (yet) the position of the applicant. Such measures can be amended, supplemented and in some instances discarded (see eg Shindler, paras 47 and 63). The applicant has thus to bring an action against the decision terminating the procedure, relying on the defects of the preliminary measure (IBM, para 12). Confirmatory and implementing measures cannot be challenged either (Case C-131/03 P Reynolds Tobacco and Others v Commission EU:C:2006:541, para 55); in such cases, it is the original act that must be challenged. That being said, the CJEU has explained that if

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new factual or legal elements are introduced, the act cannot be deemed a ‘confirmatory’ measure (International Management Group, para 67). Consequently, measures that can be challenged include acts of the Council (Commission v Council (ERTA)) or of the Commission (Case 8-11/66 SA Cimenteries CBR Cementsbedrijven NV and others v Commission (Noordwijks Cement Accord) [1967] ECR 75). Generally, acts that cannot be reviewed are, for example, informal communications such as telex messages, letters (Slovak Republic v Commission), internal instructions (Case C-366/88 France v Commission EU:C:1990:348, para 9) unless, of course, they are in fact legally binding, etc.

10.2.2 Grounds of review Article 263, second paragraph TFEU provides that [the Court] shall for this purpose have jurisdiction in actions brought … on grounds of lack of competence, infringement of an essential procedural requirement, infringement of this Treaty or of any rule of law relating to its application, or misuse of powers. See Figure 10.1. Lack of competence

Based on breach of principle of conferral Based on breach of principle of institutional balance

Infringement of an essential procedural requirement

Failure to use the correct procedure Failure to use the correct legal form of an act Failure to provide reasons for the adoption of an EU act

Infringement of the Treaty or of any rule of law relating to its application

Legal certainty Legitimate expectations Non-retroactivity Proportionality Subsidiarity Equal treatment

Misuse of powers

Use of powers for purpose other than that for which they were granted

Figure 10.1 Grounds of review of EU acts

10.2.2.1

Lack of competence The first ground for review is based on the principle of conferral (see 3.2.1) and the principle of institutional balance (see 2.2.1 and 5.2.1). The Court must ensure that an institution has not acted beyond the scope of its competences, ie it is allowed by the Treaties to act in this field, and in exercising its competences, it has not encroached upon the powers of other institutions. This is well illustrated in Case C-327/91 France v Commission [1994] ECR I-3641, in which France successfully challenged, on the ground of lack of competence, an act of the Commission seeking to conclude an agreement with the USA on the application of EC and US competition laws. Under former Article 228(1) TEEC, the power to conclude the agreement belonged to the

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Council (the whole procedure of negotiation and conclusion of international agreements is now covered by Article 218 TFEU). To determine whether there is indeed a lack of competence on the part of the institution, the Court will examine which legal basis was used and whether it was the correct one. After all, indicating the legal basis is ‘essential in the light of the principle of the allocation of powers enshrined in Article 5(2) TEU’ (principle of conferral, see 3.2.1) (Case C-687/15 Commission v Council EU:C:2017:803, para 48) and ‘of particular significance in order to preserve the prerogatives of the EU institutions concerned by the procedure for the adoption of a measure’ (principle of institutional balance, see 2.2.2) (Case C-687/15 Commission v Council, para 50). In Commission v Council, the former challenged ‘non-papers’ with annexes adopted by the Council on the basis that the subject matter fell within the ambit of the Common Fishery Policy, an exclusive competence of the EU, rather than, as the Council claimed, a shared competence, that of environmental protection. The Court rejected the Commission’s plea after a thorough examination of the relevant legal provisions. To determine competence, the Court seeks to identify the legal basis of the act, and in doing so examines the context, content and aims pursued by the act (Joined Cases C-626/15 and C-659/16 Commission v Council, para 76). Generally, challenges under this ground are often unsuccessful because the Court, using the teleological method of interpretation (see 8.5) and the implied powers doctrine (see 3.2.2), tends to grant broad powers to the institutions and the European Union. 10.2.2.2

Infringement of an essential procedural requirement The second ground for review enables the Court to declare void an act that infringes an essential procedural requirement. The Court has interpreted this in two ways. Originally, the Court linked this requirement to the principle of institutional balance, ensuring that all relevant institutions were involved in the adoption of an act (Case 17/ 74 Transocean Marine Paint Association v Commission [1974] ECR 1063; Case 138/79 SA Roquette Frères v Council [1980] ECR 3333). Given the changes made to the lawmaking process, this use of the second ground for review has considerably diminished. An act that has not been adopted following the correct procedure can also be declared invalid for violation of an essential procedural requirement (Case 68/86 United Kingdom v Council EU:C:1988:85, paras 48–49). For example, failure to comply with the time limits set by the legislature constitutes an infringement of essential procedural requirements (Case C-197/13 P Spain v Commission EU:C:2014:2157, para 103). The CJEU has pointed out that if an EU institution does not use the legal form as specified in the Treaties, then the act can be annulled on the basis of an infringement of an essential procedural requirement. The justification for this approach is that the use of the incorrect form, eg a conclusion rather than a decision, creates uncertainty as to whether it is legally binding and so breaches the principle of legal certainty (Case C687/15 Commission v Council, para 44). In contrast, failing to provide a legal basis for the adoption of the act is not automatically a violation of an essential procedural requirement as the legal basis might be ascertained by examining other parts of the measure and is thus clear to the parties concerned (Case C-687/15 Commission v Council, para 55).

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Also, not providing reasons for the adoption of an EU measure is considered an infringement of an essential procedural requirement (see 4.3.1). In Case C-378/00 Commission v European Parliament and Council [2003] ECR I-937 the Court explained: First, the statement of reasons for [a Union] measure must appear in that measure (see, to that effect, Case C-291/98 P Sarrió v Commission [2000] ECR I-9991, paragraphs 73 and 75) and, second, it must be adopted by the author of the measure (see, to that effect, Case C-137/92 P Commission v BASF [1994] ECR I2555, paragraph 67), so that, in the present case, a declaration adopted by the Council alone cannot in any event serve as a statement of reasons for a regulation adopted jointly by the Parliament and the Council … (para 66) What is more, the statement of reasons must fulfil some substantial requirements. In Joined Cases C-27/00 and 122/00 R v Secretary of State for the Environment, Transport and the Regions, ex parte Omega Air [2002] ECR I-2569, the Court spelled out that … it should be borne in mind that it is settled case-law that the statement of reasons required by Article [263 TFEU] must be adapted to the nature of the act in question. It must disclose in a clear and unequivocal fashion the reasoning followed by the [Union] institution which adopted the measure in such a way as to make the persons concerned aware of the reasons for the measure and to enable the Court to exercise its power of review. It follows from the case-law that it is not necessary for details of all relevant factual and legal aspects to be given. The question whether the statement of the grounds for an act meets the requirements of Article [263 TFEU] must be assessed with regard not only to its wording but also to its context and to all the legal rules governing the matter in question. … The Court has also held that if the contested measure clearly discloses the essential objective pursued by the institution, it would be excessive to require a specific statement of reasons for the various technical choices made … (paras 46– 47) The CJEU, however, distinguishes between acts and provisions of general application and others, requiring less information to be provided in relation to the former: [T]he statement of reasons in a regulation of general application cannot be required to specify the various facts, frequently very numerous and complex, on the basis of which the regulation was adopted, nor a fortiori to provide a more or less complete evaluation of those facts … That is particularly the case where the relevant factual and technical elements are well known to the circles concerned. (para 51) In such cases, the Court requires the statement of reasons to be limited to indicating (1) ‘the general situation which led to the measure’s adoption’ and (2) ‘the general objectives which it is intended to achieve’ (Case C-72/15 PJSC Rosneft Oil Company v Her Majesty’s Treasury and Others EU:C:2017:236, para 120). 10.2.2.3

Infringement of the Treaty or of any rule of law relating to its application Equivalent to ‘violation de la loi’ in French judicial review and the expression of the principle of legality in the Union legal order, this wider ground for review can be used to challenge any EU act that infringes rules – apart from those pertaining to competence, procedure and form, and purpose – relating to the substance of the act and the factual and legal grounds for its adoption. It covers not only breaches of the

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provisions of the Treaties but also of the European Charter of Fundamental Rights (see 4.6.1), secondary legislation (see 4.3) and international agreements concluded by the EU (see 4.7). It is also under this heading, and in particular its ambiguous expression ‘any rule of law relating to its application’, that the Court of Justice has examined cases on the ground of a breach of the general principles of EU law (see 4.5). Among those general principles of law are: (a) Legal certainty. The principle of legal certainty requires that the law be certain, clear and precise (Case C-439/01 Cipra and Kvasnicka v Bezirkshauptmannschaft Mistelbach [2003] ECR I-745, para 47) as well as predictable as it enables an individual to ‘know without ambiguity what are his rights and obligations and may take steps accordingly’ (Case 169/80 Gondrand Frères and Garancini [1981] ECR 1931, para 17). Where the decision entails financial consequences, the principle of legal certainty has to be observed strictly ‘in order that those concerned may know precisely the extent of the obligations which they impose on them’ (Case 326/85 Netherlands v Commission EU:C:1987:547, para 24). As an example, the Court has required that both EU and national measures are published so that individuals are able to ascertain their obligations (Case C-345/06 Heinrich EU:C:2009:140, paras 42–47). (b) Legitimate expectations (Case 120/86 Mulder v Minister van Landbouw en Visserij [1988] ECR 2321 and Joined Cases C-104/89 and 37/90 Mulder and Others v Council and Commission [1992] ECR I-3061). This principle has its roots in the principles of legal certainty and good faith. The idea is that anyone acting and following the law in good faith should not be frustrated in their expectations. In other words, it is not possible for an EU institution to renege on its earlier position. In Case T-347/03 Eugénio Branco, Lda EU:T:2005:265, the Court spelled out three conditions to claim entitlement to the protection of legitimate expectations: First, precise, unconditional and consistent assurances originating from authorised and reliable sources must have been given to the person concerned by the Community authorities. Second, those assurances must be such as to give rise to a legitimate expectation on the part of the person to whom they are addressed. Third, the assurances given must comply with the applicable rules. (para 102) The principle is, however, not absolute as it can be set aside by overriding public interest (Case C-526/14 Kotnik and Others EU:C:2016:570, para 68). (c) Non-retroactivity. Whilst the Court protects the principle of non-retroactivity (Case 63/83 R v Kirk [1984] ECR 2689), it accepts that exceptionally some EU measures can take effect from a point in time before their publication (Case 98/78 Racke v Hauptzollamt Mainz [1979] ECR 69). Where the decision entails penal measures, the Court will demand strict adherence to the principle of non-retroactivity (Case C-331/88 The Queen and The Minister for Agriculture, Fisheries and Food and The Secretary of State for Health, ex parte Fedesa and Others EU:C:1990:391, para 42). (d) Proportionality (Case C-491/01 R v Secretary of State, ex parte British American Tobacco [2002] ECR I-11453) (see 3.4.2). The Court has offered a restrictive interpretation of this principle, specifying that when EU institutions enjoy broad discretion then the Court will limit itself to examining whether ‘the measure is manifestly inappropriate having regard to the objective which those institutions

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are seeking to pursue’ (Joined Cases C-643/15 and C-647/15 Slovak Republic and Hungary v Council EU:C:2017:631, para 207). (e) Subsidiarity (Case C-508/13 Estonia v European Parliament and Council EU:C:2015:403) (see 3.4.1). (f) Equal treatment (Case 61/77 Commission v Ireland [1978] ECR 417), as enshrined in Articles 18 and 19(1) TFEU. The principle of equal treatment means that comparable situations cannot be treated differently and different situations cannot be treated in the same way, unless such treatment is justified and based on objective and appropriate criteria (Case T-544/13 Dyson Ltd v Commission EU:T:2015:836, paras 93 and 103). It should be noted that these grounds are often intertwined in their application. For example, as the Court noted in Case 98/78 Racke v Hauptzollamt Mainz [1979] ECR 69, the principle of non-retroactivity must be understood in relation to principles of legal certainty and legitimate expectations: Although in general the principle of legal certainty precludes a [Union] measure from taking effect from a point in time before its publication, it may exceptionally be otherwise where the purpose to be achieved so demands and where the legitimate expectations of those concerned are duly respected. (para 20, emphasis added) This ground has also been used to review the content of EU legislation against, notably, fundamental rights. In the words of the Court, ‘fundamental rights form an integral part of the general principles of law, the observance of which it ensures’ (Joined Cases 36, 37, 39 and 40/59 Nold and Others v High Authority [1960] ECR 423, para 13). For example, the rights of the defence (Case C-349/07 Sopropé – Organizações de Calçado Lda v Fazenda Pública EU:C:2008:746, para 36) and the right to be heard (Joined Cases C-129/13 and C-130/13 Kamino International Logistics BV and Datema Hellmann Worldwide Logistics BV v Staatssecretaris van Financiën EU:C:2014:2041, para 28) are considered as general principles of EU law. Since the adoption of the Charter of Fundamental Rights of the European Union as a treaty, it is also possible to class under this ground of review challenges for violations of the fundamental rights protected therein (see eg Joined Cases C-584/10 P, C-593/10 P and C-595/10 P Commission and Others v Kadi EU:C:2013:518, paras 98–102). Yet, so far, these provisions have been used to complement the relevant principles rather than used as such. 10.2.2.4

Misuse of powers This ground of review enables the Court of Justice to declare void an act that is based on a specific legal provision but yet pursues a different objective (Case 105/75 Giuffrida v Council [1976] ECR 1395). The Court has further clarified, in ex parte British American Tobacco, that … a measure is vitiated by misuse of powers only if it appears on the basis of objective, relevant and consistent evidence to have been taken with the exclusive or main purpose of achieving an end other than that stated or evading a procedure specifically prescribed by the Treaty for dealing with the circumstances of the case … (para 189) (See also Case C-225/17 P Islamic Republic of Iran Shipping Lines v Council EU:C:2019:82, para 115.)

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Unless the applicant is able to substantiate its claim that the act was adopted in order to achieve purposes other than those for which it was intended, the Court will dismiss the plea of illegality (see eg Case C-323/88 SA Sermes and Directeur des services des douanes de Strasbourg EU:C:1990:299, paras 32–36; Rosneft Oil Company, paras 134– 137). It is often because of the lack of evidence that this plea is unsuccessful. 10.2.2.5

Extent of judicial review In numerous national jurisdictions, it is possible to challenge an act on the basis that an error in assessment has been made by the institution. The error can be one of fact or law. Whereas the drafters of the ECSC (see 1.5) had expressly specified that judicial review did not entail an assessment of the situation stemming from economic facts and circumstances, the EU Treaties are silent on the subject matter. First, the Court works on the basis that, in areas which involve political, economic and social policy choices and require complex, usually technical and scientific assessments, EU institutions enjoy broad discretion (ex parte British American Tobacco, para 123). In such situations, [j]udicial review of the exercise of that discretion must therefore be limited to examining whether it has been vitiated by manifest error or misuse of powers, or whether the institution concerned has manifestly exceeded the limits of its discretion. (Case C-84/94 United Kingdom v Council EU:C:1996:431, para 58) Another common formulation of the limits on the control of the CJEU is that it is bound to [verify] whether relevant procedural rules have been complied with, whether the facts relied on have been accurately stated, and whether there has been a manifest error in the appraisal of those facts or a misuse of powers. (Case C-345/18 P Caviro Distillerie Srl v Commission EU:C:2019:589, para 15) The CJEU has thus reviewed measures in relation to anti-dumping (Caviro Distillerie Srl), dangerous substances (Case C-77/09 Gowan Comércio Internacional e Serviços Lda v Ministero della Salute EU:C:2010:803), competition law (Case 42/84 Remia VC and Others v Commission EU:C:1985:327), medicinal products (Case T-329/16 BristolMyers Squibb Pharma EEIG v Commission and European Medicines Agency EU:T:2018:878), waiver of immunity or defence of immunity (Joined Cases T-346/11 and T-347/11 Gollnisch v European Parliament EU:T:2013:23), international trade rules (Case T-317/02 Fédération des industries condimentaires de France (FICF) and Others v Commission EU:T:2004:360) and the common commercial policy (Case C100/17 P Gul Ahmed Textile Mill Ltd v Council and Commission EU:C:2018:842).

10.2.3 Time limits Article 263, sixth paragraph TFEU stipulates that The proceedings provided for in this Article shall be instituted within two months of the publication of the measure, or of its notification to the plaintiff, or, in the absence thereof, of the day on which it came to the knowledge of the latter, as the case may be. (emphasis added) This is supplemented by Article 59 of the Rules of Procedure of the General Court (see Chapter 8), which specifies: Where the time limit allowed for initiating proceedings against a measure adopted by an institution runs from the publication of that measure in the Official

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Journal of the European Union, that time limit shall be calculated, for the purposes of Article 58(1)(a), from the end of the fourteenth day after such publication. As a result, the Court has clearly spelled out that the main criteria are the date of publication in the Official Journal for regulations and directives, or the date of notification if the measure is a decision addressed to the applicant. If, and only if, neither of those applies will the Court look at the date when the measure came to the applicant’s attention: It is clear simply from the wording of that provision [Article 263] that the criterion of the day on which a measure came to the knowledge of an applicant, as the starting point of the period prescribed for instituting proceedings, is subsidiary to the criteria of publication or notification of the measure. (Case C-122/95 Germany v Council [1998] ECR I-973, para 35) Based on the principle of legal certainty, the Court has refused to adopt a wide interpretation of the Treaty with regard to the time limit, as can be seen in Joined Cases T-121/96 and 151/96 Mutual Aid Administration Services NV v Commission [1997] ECR II-1355: It is settled case-law that the time-limit prescribed for bringing actions under Article [263] of the Treaty is a matter of public policy and is not subject to the discretion of the parties or the Court, since it was established in order to ensure that legal positions are clear and certain and to avoid any discrimination or arbitrary treatment in the administration of justice … (para 38) The Court added in AssiDomän Kraft Products AB that allowing for deference of the starting point of the period for bringing proceedings would mean that EU measures which produce legal effects could indefinitely be called into question and thus breach the principle of legal certainty, as well as the requirements of good administration of justice and procedural economy (Case C-310/97 P Commission v AssiDomän Kraft Products AB and others EU:C:1999:407, para 61). Even in situations where there was no direct communication with the addressees and they became aware of the measures at a later date, the Court has explained that publication in the Official Journal is sufficient as it ‘enable[s] the persons concerned to identify the legal remedies available to them in order to challenge their designation in the lists concerned and the date when the period for bringing proceedings expire’ (Joined Cases C-478/11 to C-482/11 P Gbagbo et al v Council EU:C:2013:258, para 62). That being said, the Court has granted some protection to individuals. For example, in Case C-143/95 P Commission v Sociedade de Curtumes a Sul do Tejo Lda (Socurte) and Others [1997] ECR I-1, it has declared that the notification must meet certain requirements: … notification of the [EU] acts referred to in [Article 263] and Article [297 TFEU] necessarily involves the communication of a detailed account of the contents of the measure notified and of the reasons on which it is based. In the absence of such an account, the third party concerned would be denied precise knowledge of the contents of the act in question and of the reasons for which it was adopted, which would enable him to bring proceedings effectively against that decision. (para 31)

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10.2.4 Locus standi – who may seek annulment of an EU act? Annulment proceedings may be brought by three categories of applicants (see Figure 10.2). The distinction between the members of each category lies in the nature of the interest they must show in order to establish a right to bring an action.

Locus standi Privileged applicants (Member States, the European Parliament, the Council and the Commission)

Semi-privileged applicants (European Central Bank and Committee of the Regions)

Non-privileged applicants (Natural and legal persons)

Figure 10.2 Locus standi in annulment proceedings

The purpose of locus standi, which is separate from the merits of the action, is to prevent the Court being swamped and the legislation process being disrupted by a large number of challenges to the legality of legislation. The balance between this consideration and the rule of law can be a hard one to strike and a strict approach to standing is likely to be controversial, as is the case in the context of EU law. 10.2.4.1

Privileged applicants Article 263, second paragraph TFEU specifies that the Court shall for this purpose [of review of EU acts] have jurisdiction in actions brought by a Member State, the European Parliament, the Council or the Commission … The first category of applicants is called ‘privileged’ because they are exempt from any rule on standing. Member States, the European Parliament, the Council and the Commission have an automatic right to challenge any binding EU act.

10.2.4.2

Semi-privileged applicants Article 263, third paragraph TFEU provides: The Court shall have jurisdiction under the same conditions in actions brought by the Court of Auditors and by the European Central Bank and by the Committee of the Regions for the purpose of protecting their prerogatives. This second category of applicants is referred to as ‘semi-privileged’ because they are allowed to bring an action for annulment only for the purpose of protecting their prerogatives, which include the right to participate in the decision-making process as and when provided by the TFEU. There has been, to date, no such action taken by a semi-privileged applicant.

10.2.4.3

Non-privileged applicants Article 263, fourth paragraph TFEU gives individuals the right to request the judicial review of a European Union act: 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. (emphasis added)

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This third category of applicant is the most controversial, comprising ‘natural persons’ (individuals) and ‘legal persons’ (bodies with legal personality). Whilst the definition of a natural person is uncontested, the Court has set certain requirements for applicants to qualify as a legal person. In Case T-161/94 Sinochem Heilongjiang v Council [1996] ECR II-695 the Court explained: … It is settled law that, under the [Union] judicial system, an applicant is a legal person if, at the latest by the expiry of the period prescribed for proceedings to be instituted, it has acquired legal personality in accordance with the law governing its constitution … or if it has been treated as an independent legal entity by the [Union] institutions. … (para 31) In very exceptional cases, the concept of ‘legal person’ has been applied to persons that do ‘not have legal personality according to the law of a Member State or a third State’ but have such personality in accordance with the law of an entity that is not recognised as a State and does not have its own law (Case T-512/12 Front Populaire pour la libération de la saguia-el-hamra et du rio de oro (Front Polisario) v Council EU:T:2015:953, para 60). These applicants are called ‘non-privileged’ because they have to satisfy strict standing requirements in order to establish their right to challenge an EU act. The Court’s approach to the interpretation of those requirements has not been entirely consistent, but the general effect of the case law is to make it extremely difficult for non-privileged applicants to challenge acts other than decisions addressed to them. It should also be noted that most applications stem from this group. There are three types of EU act that an applicant may challenge (see Figure 10.3): (a) an act addressed to the individual; (b) an act of direct and individual concern to the applicant; and (c) a regulatory act of direct concern, with no implementing measures. In some instances, the Court will examine each category in turn (see eg Case T-125/18 Associazione Nazionale Granosalus – Liberi Cerealicoltori & Consumatori (Associazione GranoSalus) v Commission EU:T:2019:92, paras 48–96) and in others will dismiss two categories of acts and focus on one only (see eg Case T-512/14 Green Source Poland sp. z o.o v Commission EU:T:2017:299, para 24). Category (a)

Act addressed to the individual

Category (b)

Act of direct and individual concern to the applicant, eg: – decision addressed to another individual or a Member State – act of general application in the form of a regulation or directive

Category (c)

Regulatory act of direct concern and no implementing measures

Figure 10.3 Categories of acts that may be challenged by an applicant

Category (a) is fairly straightforward in that a legal or natural person may challenge an act (an individual decision) addressed to that person. As regards category (b), the expression ‘direct and individual concern’ is of crucial importance. In Case 25/62 Plaumann & Co v Commission [1963] ECR 95, the Court explained that an act could be challenged by an individual if it could be proved that the

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act at issue was of direct and individual concern to the applicant. Recent case law shows that the Plaumann jurisprudence is still valid. In Case T-259/10 Ax v Council [2011] ECR II-176, the Court has reiterated and applied the ‘direct and individual concern’ test. That being said, the Court sometimes does not clearly separate the two elements (eg Case T-351/09 Acetificio Marcello de Nigris Srl v Commission [2011] ECR II-216).

se

ca ple In Case 25/62 Plaumann v Commission [1963] ECR 95, the German Government had m exa asked the Commission for permission to suspend the collection of taxes on imports of clementines into Germany from non-Member States. The Commission refused. The applicant, Mr Plaumann, an importer of clementines, challenged the decision of the Commission, which had been addressed to the German Government. The Court explained that [p]ersons 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. In the present case the applicant is affected by the disputed decision as an importer of clementines, that is to say, by reason of a commercial activity which may at any time be practised by any person and is not therefore such as to distinguish the applicant in relation to the contested decision as in the case of the addressee. (at 107)

First, the act must be of ‘direct concern’. In Compagnie Continentale (France) SA (Case C-391/96 P Compagnie Continentale (France) SA v Commission EU:C:1998 :194, para 41), the Court defined it in the following terms: for a person to be directly concerned by a [Union} measure, the latter must directly affect the legal situation of the individual and leave no discretion to the addressees of that measure who are entrusted with the task of implementing it, such implementation being purely automatic and resulting from Community rules without the application of other intermediate rules. (para 41; see also slightly amended in Case C-414/18 Iccrea Banca SpA Istituto Centrale del Credito Cooperativo v Banca d’Italia EU:C:2019:1036, para 66) In other words, two cumulative criteria must be fulfilled. The act: (a) directly affects the legal position and rights of the individual; and (b) does not endow the national authorities with any discretionary power (margin of appreciation) with regard to the implementation of the act. In relation to the first requirement, the Court explained in Joined Cases 41–44/70 NV International Fruit Company v Commission [1971] ECR 411 that there is no need to show the existence of a direct causal link between the challenged EU act and the impact on the individual, but only that the act directly affects the complainant. The applicants must also have their legal position affected. Thus, being at a disadvantage does not suffice to be considered as being directly affected because the legal position of the applicants is not necessarily altered (Case C-465/16 P Council v Growth Energy and Renewable Fuels Association EU:C:2019:155, para 81). Also, their own position must be affected. In Bolivarian Republic of Venezuela v Council, the Court pointed out that the contested provisions prohibited operators established in the EU from engaging in economic and financial relations with natural and legal persons in Venezuela and thus

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did not directly concern Venezuela (Case T-65/18 Bolivarian Republic of Venezuela v Council EU:T:2019:649, para 48). In relation to the second requirement, the Court stated in Case 294/83 Parti Ecologiste ‘Les Verts’ v European Parliament [1986] ECR 1339 that [a] measure will be of direct concern to an applicant where it constitutes ‘a complete set of rules which are sufficient in themselves and which require no implementing provisions’, since in such circumstances the application of the measure ‘is automatic and leaves no room for any discretion.’ (para 31) The Court has specified that this means that ‘where the autonomous will of the addressee interposes itself between the decision and its effects on the applicant’, the act is not of direct concern (Case T-453/10 Northern Ireland Department of Agriculture and Rural Development v Commission EU:T:2012:106, para 54, emphasis added). This approach is justified by the fact that if the national authorities had some discretionary power then the act could be challenged at the national level. In some instances, the Court has explained that the second criterion is also fulfilled when the possibility that the addressee will not give effect to the Union measure is theoretical and when there is no doubt that the Member State will act in conformity with it (Case C-386/96 P Société Louis Dreyfus & Cie v Commission EU:C:1998:193, para 44). Secondly, the act must be of ‘individual concern’. The definition of ‘individual concern’ was first iterated in Plaumann (see case example above) and never altered since. The same formulation is found in recent cases such as Case C-414/18 Iccrea Banca SpA Istituto Centrale del Credito Cooperativo v Banca d’Italia EU:C:2019:1036, where the Court reiterates that persons other than those to whom a decision is addressed may claim to be individually concerned only if that decision affects them by virtue of certain attributes which are peculiar to them or by reason of circumstances in which they are differentiated from all other persons and thus distinguishes them individually just as in the case of the person to whom the decision is addressed. (para 68) This means that the expression ‘individual concern’ is to be defined narrowly, in the sense that it covers a limited and identifiable group of individuals (Joined Cases 106 and 107/63 Toepfer und Getreide-Import Gesellschaft v Commission [1965] ECR 405). Clearly, individuals must prove that they are in a position that distinguishes them from other persons. This was again spelled out in Case 26/86 Deutz und Geldermann, Sektkellerei Breisach (Baden) GmbH v Council [1987] ECR 941: In order for a measure to be of individual concern to the persons to whom it applies, it must affect their legal position because of a factual situation which differentiates them from all other persons and distinguishes them individually in the same way as a person to whom it is addressed. (para 9) And in Case C-309/89 Codorníu SA v Council [1994] ECR I-1853: Codorniu registered the graphic trade mark ‘Gran Cremant de Codorniu’ in Spain in 1924 and traditionally used that mark both before and after registration. By reserving the right to use the term ‘crémant’ to French and Luxembourg producers, the contested provision prevents Codorniu from using its graphic trade mark. It follows that Codorniu has established the existence of a situation which from the point of view of the contested provision differentiates it from all other traders. (paras 21 and 22)

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This can be contrasted with Case T-99/94 Asociación Española de Empresas de la Carne v Council [1994] ECR II-871, in which the Court stressed that … [u]nlike the regulation in question in Case C-309/89 [Codorniu] … the directive now under consideration has not affected specific rights of the applicant or its members. On the contrary, the applicant and its members are – like all traders in the [Union] operating in the sector in question – subject to the national measures adopted for the purposes of transposing the directive. (paras 20–21) However, even if it is possible to determine more or less precisely the number and/or the identity of the persons to whom the measure applies, if the measure affects all individuals in a similar manner by virtue of an objective legal or factual situation, the measure cannot be said to be of individual concern (Case C-456/13 P T&L Sugars Ltd and Sidaul Açúcares, Unipessoal Lda v Commission EU:C:2015:284, para 64; Case C145/17 P Internacional de Productos Metálicos (IPM) SA v Commission EU:C:2018:839, para 35). In such cases, the Court has specified that those persons may nevertheless be individually concerned by that measure inasmuch as they form part of a limited class of economic operators and that can be the case particularly when the decision alters rights acquired by the individual prior to its adoption. (IPM SA, para 36) The Plaumann test has on numerous occasions been considered unduly restrictive. For example, Advocate General Jacobs, in Case C-50/00 P Unión de Pequeños Agricultores v Council [2002] ECR I-6677, suggested a new test: The only satisfactory solution is … to recognise that an applicant is individually concerned by [an EU] measure where the measure has, or is liable to have, a substantial adverse effect on his interests. (para 102) It was accepted by the General Court in Case T-177/01 Jégo-Quéré et Cie SA v Commission [2002] ECR II-2365, para 51. Yet the Court of Justice refused to follow the opinion of the Advocate General for two main reasons: … [I]t is for the Member States to establish a system of legal remedies and procedures which ensure respect for the right to effective judicial protection. … [I]n accordance with the principle of sincere cooperation laid down in Article [4] of the Treaty, national courts are required, so far as possible, to interpret and apply national procedural rules governing the exercise of rights of action in a way that enables natural and legal persons to challenge before the courts the legality of any decision or other national measure relative to the application to them of a [Union] act of general application, by pleading the invalidity of such an act. … While it is, admittedly, possible to envisage a system of judicial review of the legality of [Union] measures of general application different from that established by the founding Treaty and never amended as to its principles, it is for the Member States, if necessary, in accordance with Article 48 [TEU], to reform the system currently in force. (paras 41–42 and 45) In paras 41 and 42 of the judgment, the Court confirms that individuals can still use national remedies, a position it reiterated in the Acetificio case (above). The Court also refers in para 45 to its inability to offer a different interpretation of the relevant provision. Although the Court acknowledges that there must be some form of effective judicial remedy, it does not believe that it can go beyond the wording of the Article

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(see, eg, Acetificio), and has explained in Case T-18/10 Inuit Tapiriit Kanatami v European Parliament and Council [2011] ECR II-5599 that [a]ccording to settled case-law, the Courts of the European Union may not, without exceeding their jurisdiction, interpret the conditions under which an individual may institute proceedings against a regulation in a way which has the effect of setting aside those conditions, expressly laid down in the Treaty, even in the light of the principle of effective judicial protection. (para 51) Much hope was put in Article 47, first paragraph of the Charter of Fundamental Rights to challenge the strict test imposed by the Court. However, in T&L Sugars Ltd (para 44), although the Court admitted that the conditions of admissibility had to be interpreted in light of the right to effective judicial protection, it stressed that such interpretation could not lead to setting aside conditions expressly laid down in the Treaty (see also Case T-403/15 JYSK sp. z o.o. v Commission EU:T:2017:300, para 64). As mentioned above, to some extent it is sometimes possible for non-privileged applicants to contest the validity of EU acts in the national courts instead of seeking their annulment in Luxembourg. The CJEU has pointed out that under the principle of sincere cooperation, national courts are required to interpret and apply, as far as possible, the domestic procedural rules governing the exercise of rights of action in a manner which will enable those persons to challenge before the courts the legality of any decision or other national measure relating to the application to them of a Union act such as that in question, by pleading that the latter is invalid and by asking them to make a reference to the Court of Justice for a preliminary ruling on validity. (Green Source Poland sp. z o.o, para 55) Indeed, under the Article 267 TFEU procedure (see Chapter 9), national courts can question the validity of EU acts. The Court has explained that ‘references on validity constitute, like actions for annulment, means for reviewing the legality of European Union acts’ (T&L Sugars Ltd, para 47). This system has an array of advantages, in that, indirect challenges: (a) can be brought against any Union act (even those of a non-binding nature), on any grounds (even those outside Article 263, second paragraph TFEU); (b) can be launched by anyone (without regard to the ‘direct and individual concern’ test); and (c) can be brought at any time. The Court has specified that when individuals use Article 267 TFEU, they can rely ‘on complaints that could be put forward in the context of an action for annulment under Article 263 TFEU’ (Case C-644/17 Eurobolt BV EU:C:2019:555, para 26). Nonetheless, the Court held in Case C-188/92 TWD Textilwerke Deggendorf v Germany [1994] ECR I-833 that this option was not available when the applicant could clearly have challenged the act in annulment proceedings but failed to do so before the expiry of the two-month time limit laid down in Article 263 TFEU (see also Case C-256/16 Deichmann SE v Hauptzollamt Duisburg EU:C:2018:187, para 39). In very clear terms, the Court has stated in Case C-135/16 Georgsmarienhütte GmbH and Others v Germany EU:C:2018:582 that where a person seeking to challenge an EU measure undoubtedly has standing under the fourth paragraph of Article 263 TFEU, that person is bound to make

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use of the remedy provided for in that provision by bringing an action before the General Court. (para 18) In other cases, the Court has, however, allowed for validity challenges under Article 267 TFEU as it was not obvious that an action brought by the applicant under Article 263 TFEU would have been admissible (see Case C-241/95 R v Intervention Board for Agricultural Produce, ex parte Accrington Beef Co Ltd and Others [1996] ECR I-6699, para 15, and Case C-408/95 Eurotunnel SA and Others v SeaFrance [1997] ECR I-6315, para 29). In Accrington Beef the applicant challenged a regulation of general application, whilst in Eurotunnel the applicant challenged provisions of a directive. The Court explained that permitting actions under Article 267 TFEU to challenge the validity of EU acts would breach the principle of legal certainty (Case C-241/01 National Farmers’ Union and Secrétariat général du gouvernement [2002] ECR I-9079, paras 35–36). The downsides of indirect review are, however, numerous too. For example: (a) the preliminary reference procedure under Article 267 TFEU can be used only if a national court has jurisdiction, and this may not be the case where there are no national implementing acts to challenge; (b) the applicant may need to breach EU law before challenging the legality of the act on which the illegal behaviour rests; (c) individual applicants have no right to demand indirect review of EU law, as it is left in the hands of the national courts to decide whether it is necessary to ask for a preliminary reference (see Chapter 9). The most recent cases have focused on the difference between the second (b) and third (c) categories of EU acts (see Figure 10.3). The third category of acts, category (c), that may be challenged by non-privileged applicants is new, inasmuch as regulatory acts are a new type of measure introduced by the Treaty of Lisbon. There is no definition of a ‘regulatory act’ in the TFEU, but the General Court clarified the matter in the Inuit case (above) by stating that … the meaning of ‘regulatory act’ for the purposes of the fourth paragraph of Article 263 TFEU must be understood as covering all acts of general application apart from legislative acts. (para 56) [The] categorisation [of an act] as a legislative act or a regulatory act according to the FEU Treaty is based on the criterion of the procedure, legislative or not, which led to its adoption. (para 65) This definition has been criticised for taking a procedural, rather than substantive, approach. To determine whether the act is of general application, the Court will examine the purpose and content of the act (Case T-849/16 PGNiG Supply & Trading GmbH v Commission EU:T:2017:924, para 49). If the act ‘applies to objectively determined situations and entails legal effects for categories of persons envisaged generally and in the abstract’ then it is considered to be of general application (para 49). In this light, provided that they are of general application, acts adopted under the comitology procedure (see 4.3) can be classed as regulatory acts (eg Case T-262/10 Microban International Ltd and Microban (Europe) Ltd v Commission [2011] ECR II7697). It is also likely that measures adopted pursuant to other forms of ad hoc procedures by the Commission qualify as regulatory acts. Likewise delegated acts adopted pursuant to Article 290 TFEU can be understood as regulatory acts, since the

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Treaty expressly specifies that these are ‘non-legislative acts of general application’ and clearly distinguishes them from legislative acts. It must be noted that for this category, the act only needs to be of direct concern to the individual. The definition used of ‘direct concern’ is the same as the one for category (b). For example, in T&L Sugars Ltd the Court observed that as the regulation and implementing regulation were directed at producers of sugar, they were not of direct concern to the applicant as they did not have the status of producers but that of cane sugar refiners and their legal situation was not directly affected by those regulations (para 37). There is no requirement that the act be of individual concern. This may lead to some absurd results. Indeed, a prohibition included in a non-legislative act could be challenged on the basis that it is only of direct concern, whilst the same prohibition enshrined in a legislative act would need to be challenged on the basis that it is of direct and individual concern to the applicant. In addition to being of ‘direct concern’, the regulatory act in question must not entail any implementing measures. In Case C-274/12 Telefónica SA v Commission EU:C:2013:852, the Court of Justice argued that the purpose of the introduction of this new wording to Article 263, fourth paragraph TFEU was to prevent an individual from being denied access to legal remedies (see also Associazione GranoSalus, para 68). As the Court explained, if a regulatory act entails implementing measures, judicial review of compliance with the European Union legal order is ensured as is clear from Article 19(1) TEU, not only by the Court of Justice, but also by the courts of the Member States. (Associazione GranoSalus, para 70) If the responsibility for the implementing measures lies with the Member State, the act may be challenged at national level by claiming that it is invalid, thereby obliging the national court to request a preliminary ruling from the Court (see Chapter 9) (Telefónica SA, para 29; T&L Sugars Ltd, para 31). Where the responsibility lies with EU institutions, the implementing act may be challenged under Article 263 TFEU (under category (b) as above) with, in support of this action, a plea of illegality under Article 277 TFEU (see below 10.4) (Telefónica SA, para 29; T&L Sugars Ltd, para 31; IPM SA, para 51). If there are no such implementing measures then the act (provided it is a regulatory act) may be reviewed under Article 263, fourth paragraph TFEU (under category (c)). When defining ‘implementing measures’, the Court explained that it needs to assess these measures by reference to (1) the position of the applicant and not that of other persons, and (2) the subject matter of the action (paras 30–31). In particular, the Court has stressed that the fact that a regulatory act of the European Union entails implementing measures, within the meaning of the final limb of the fourth paragraph of Article 263 TFEU, such that certain legal effects of the regulation only materialise through those measures, does not exclude that that regulation produces, in the legal situation of a natural or legal person, other legal effects, which do not depend on the adoption of implementing measures. (Case C-384/16 P European Union Copper Task Force v Commission EU:C:2018:76, para 45) For example, in Microban (above) the act did not entail any implementing measures as it prohibited with immediate effect the marketing of a substance without the need for Member States to take any action. In contrast, in T&L Sugars Ltd and in Associazione

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GranoSalus, the relevant regulatory acts did entail implementing measures on the national level, such as the decision to grant the right to market or import sugar and the decision to renew marketing authorisations for phytopharmaceutical products containing glyphosate respectively. See Figure 10.4. Is it a regulatory act that can be challenged under Article 263(4) TFEU? Passed under EU legislative procedure? Yes: not a regulatory act. Can be challenged as act of direct and individual concern (b)

No: is it of general application?

No: not a reviewable act. Can be challenged as act addressed to an individual (a)

Yes: of direct concern?

No: not a reviewable act

Yes: does it entail implementing measures? Yes: not a reviewable act as regulatory act under (c). Can be challenged as act of direct and individual concern (b) No: regulatory act against which proceedings can be initiated

Figure 10.4 Summary of regulatory acts that may be challenged under Article 263, fourth paragraph TFEU

There is a striking contrast between the importance attached by the Court of Justice to the individual in the context of the rights he or she enjoys against the Member States through direct effect (6.3) and State liability (7.3), and its approach to the right of individuals to bring annulment proceedings. It can be argued that the Court’s case law has not kept pace with developments in many national systems where rules on standing have been progressively relaxed. The CJEU’s approach has also been criticised for a jurisprudence that is easier met by a natural or legal person whose financial and material interests are affected than by an association or a group of public interest seeking to protect the consumer (see eg Associazione GranoSalus) or the environment (see eg Case C-585/93 Greenpeace and Others v Commission EU:T:1995:147 and Case C-321/95 P Stichting Greenpeace Council (Greenpeace International) and Others v Commission EU:C:1998:153). The Court has explained that associations can bring an action for annulment either because it or its members or some of them have locus standi (Joined Cases C-182/03 and C217/03 Belgium and Forum 187 ASBL v Commission EU:C:2006:416, para 56). The Court has explained that

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the role played by an association in a procedure which led to the adoption of an act within the meaning of Article 263 TFEU may justify the admissibility of the action brought by the association, even though its members are not directly and individually concerned by that act. (European Union Copper Task Force, para 88). The problem though is that associations are often unable to demonstrate that they, as such, are directly and individually concerned. Furthermore, whilst trade associations are more successful in highlighting the direct and individual concerns of their members, groups of public interest struggle to do so (see eg Greenpeace and Others, para 60). It should be stressed that besides fulfilling the requirements specified in Article 263 fourth paragraph (see below), natural and legal persons need to show that they have an interest in bringing proceedings. Both locus standi and interest in bringing an action for annulment must be demonstrated (Case C-33/14 P Mory SA and Others v Commission EU:C:2015:609, para 62). In Joined Cases T-480/93 and T-483/93 Antillean Rice Mills v Commission [1995] ECR II-2305, the Court noted: It is settled law that a claim for annulment is not admissible unless the applicant has an interest in seeing the contested measure annulled … Such an interest can be present only if the annulment of the measure is of itself capable of having legal consequences … (para 59) In Shindler, the applicants could not demonstrate that the annulment of the decision authorising the Commission to open the negotiations with the United Kingdom would have an impact on their legal position (para 46). It must be noted that it is for the applicant to adduce evidence of such interest. The interest can be demonstrated by, for example, showing that the action for annulment of the act would ‘procure an advantage to the party which brought it’ (Gul Ahmed Textile Mill Ltd, para 37).

10.2.5 Effect of annulment If the act is found to be unlawful then the CJEU declares the act invalid and grants annulment. Only the challenged act is annulled, and this cannot entail the annulment of other EU acts even if they are alleged to be vitiated by the same illegality (AssiDomän Kraft Products AB (10.2.3 above), para 54). These would then need to be challenged separately. Moreover, the Court’s action is limited to judicial review in the context of an action for annulment under Article 263 TFEU (Fertisac SL (10.2.1 above), para 30). Nonetheless, by virtue of Article 264 TFEU: If the action is well founded, the Court of Justice of the European Union shall declare the act concerned to be void. However, the Court shall, if it considers this necessary, state which of the effects of the act which it has declared void shall be considered as definitive. The Court cannot though substitute its own findings to that of the author of the act since it does not have such powers under the Treaties: ‘it does not have jurisdiction to make statements of law or declarations’ (IPM SA (10.2.4.3 above), para 67). For example, in Fertisac, the Court refused to confirm the applicant’s SME status (paras 30–32). It is indeed for the author of the act to take appropriate measures in light of the Court’s judgments under Article 263 TFEU. Article 266 TFEU first paragraph provides that

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The institution whose act has been declared void or whose failure to act has been declared contrary to the Treaties shall be required to take the necessary measures to comply with the judgment of the Court of Justice of the European Union. The Court has specified that [t]hose measures do not concern the elimination of the act as such from the [Union] legal order, since that is the very essence of its annulment by the Court. They involve, rather, the removal of the effects of the illegalities found in the judgment annulling the act. The annulment of an act which has already been implemented or which has in the meantime been repealed from a certain date is thus still capable of having legal consequences. Such annulment places a duty on the institution concerned to take the necessary measures to comply with the judgment. The institution may thus be required to take adequate steps to restore the applicant to its original situation or to avoid the adoption of an identical measure … (Antillean Rice Mills, para 60) An example of the application of Article 266 is Case 13/83 European Parliament v Council (Re Transport Policy) [1985] ECR 1513. Concrete examples of such necessary measures are ‘the payments of sums due, the recovery of amounts paid but not owed and the payment of default interest’ (Joined Cases C-447/17 P European Union v Guardian Europe and C-479/17 P Guardian Europe v European Union EU:C:2019:672, para 55). Moreover, in AssiDomän Kraft Products, the Court explained: Where a number of similar individual decisions imposing fines have been adopted pursuant to a common procedure and only some addressees have taken legal action against the decisions concerning them and obtained their annulment, the principle of legal certainty … precludes any necessity for the institution which adopted the decisions to re-examine, at the request of other addressees, in the light of the grounds of the annulling judgment, the legality of the unchallenged decisions and to determine, on the basis of that examination, whether the fines paid must be refunded. (para 63) If the EU institution fails to comply with the judgment, then the individual can start an action for damages on the basis of EU non-contractual liability under Article 340 TFEU (see 10.5 below). In addition to taking the necessary measures to comply with the judgment, the institution whose act has been declared void should seek a solution to compensate the damage suffered by the applicant (Case C-412/992 P Parliament v Meskens EU:C:1994:308, para 24). Yet, Article 266 TFEU second paragraph provides that: This obligation shall not affect any obligation which may result from the application of the second paragraph of Article 340. In other words, the institution is to make good any damage caused by the unlawful act declared void if the requirements laid down in Article 340 are fulfilled (Meskens, para 24; Case T-673/15 Guardian Europe Sàrl v European Union EU:T:2017:377, para 57).

10.3 Failure to act Failure to act is the counter-point to the annulment action examined in 10.2 above. Article 265 TFEU provides:

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Should the European Parliament, the European Council, the Council, the Commission or the European Central Bank, in infringement of the Treaties, fail to act, the Member States and the other institutions of the Union may bring an action before the Court of Justice to have the infringement established. This Article shall apply, under the same conditions, to bodies, offices and agencies of the Union which fail to act. The action shall be admissible only if the institution, body, office or agency concerned has first been called upon to act. If, within two months of being so called upon, the institution, body, office or agency concerned has not defined its position, the action may be brought within a further period of two months. Any natural or legal person may, under the conditions laid down in the preceding paragraphs, complain to the Court that an institution, body, office or agency of the Union has failed to address to that person any act other than a recommendation or an opinion. Institutions that are liable are the European Parliament, the European Council, the Council, the Commission and the European Central Bank, as well as the bodies, offices and agencies of the Union (see Chapter 4). Neither the Court of Auditors nor the CJEU can be liable for failure to act. The acts that have failed to be adopted encompass acts similar to those covered under Article 263 TFEU, that is, legally binding acts capable of changing an applicant’s legal position, as well as other acts such as preparatory acts (Case 377/87 European Parliament v Council (Re Budgetary Procedure) [1988] ECR 4045) but only ‘if it is a necessary preliminary act in a procedure leading to an act that has binding legal effects’ (Joined Cases C-596/15 P and C-597/15 P Bionorica SE and Diapharm GmbH & Co KG v Commission EU:C:2017:886, para 53). In other words, the material scope of Article 265 TFEU is wider than that of Article 263. Proceedings can be initiated in the CJEU where not only is there failure to take a decision but also failure to define a position (Case 8-71 Deutscher Komponistenverband e.V. v Commission EU:C:1971:82, para 2). However, the failure to adopt an act because it is rejected in the law-making procedure cannot be challenged before the Court (eg Case C-27/04 Commission v Council (Re Deficit Procedure) [2004] ECR I-6679, para 34). The applicant must clearly pinpoint which specific act or action was expected to be taken, to the extent that the missing EU act can be ‘identified individually’ and the institution able to ascertain the content of the act or position it is supposed to adopt (Bionorica SE and Diapharm GmBH & Co KG, para 54). For example: It follows that the Parliament’s first claim, even if it is substantiated, can be upheld only in so far as the absence of a common transport policy with which the Council is charged is due to failure to take measures the scope of which can be sufficiently defined for them to be identified individually and adopted in compliance with the Court’s judgment pursuant to Article [266]. (Re Transport Policy, para 37) The aim of this procedure is to ensure the implementation of the Treaty. Indeed, the TFEU imposes positive legal duties upon EU institutions. Should they fail to carry out such duties it is possible to bring an action before the CJEU under Article 265 TFEU. It is thus imperative that the applicant shows that the Treaty obliges an institution to act. If the Treaty refers to an institution having only the right, rather than the duty, to take some action, the ‘failure to act’ procedure cannot be engaged. For example, in the enforcement proceedings under Article 258 TFEU (see Chapter 7) the Commission

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has a right but not a duty to commence judicial proceedings. Therefore, if the Commission does not start such proceedings, there is no possibility to commence an action under Article 265 TFEU (Case 247/87 Star Fruit Company SA v Commission [1989] ECR 291, paras 10–11). When there is institutional discretion the CJEU views it as excluding an obligation to act. In the light of the fact that the ‘duties’ specified in the Treaties are in reality ‘powers’, many applications are inadmissible. Similar to, albeit different from, Article 263 TFEU, privileged and non-privileged applicants have locus standi. Privileged applicants – the EU Member States, the European Parliament, the Commission, the Council, the European Council and the European Central Bank – have an automatic and absolute right to bring an action. For example, the European Parliament brought an action for failure to act against the Council in 1985, for not having adopted a comprehensive Common Transport Policy (Re Transport Policy). This procedure allows EU institutions and Member States to become guardians of the Treaty, ensuing that what the Member States agreed by way of treaty is indeed implemented. In contrast, natural and legal persons have limited standing, as they can, according to the wording of Article 265 TFEU, lodge an application only if the institution has failed to address an act to them (other than an opinion or a recommendation). In Case T-99/19 Magnan v Commission EU:T:2019:693, para 26, the Court stated that there are in fact three situations that allow natural or legal persons to bring an action under Article 265 TFEU: (1) The applicants should have been the addressees of the act that the institution failed to address to them. In other words, such applicants have to prove that they would have been the actual addressees (Case 246/81 Bethell v Commission [1982] ECR 2277). (2) The applicants’ interests are affected by the binding legal effects of the act by bringing about a distinct change in their legal position. In fact, the Court has made clear that the applicant must demonstrate direct and individual concern (Case C-107/91 Empresa Nacional de Urânio SA v Commission [1993] ECR I599). (3) The concerned act was a necessary preliminary act in a procedure leading to an act that has binding legal effects. In addition to demonstrating locus standi, natural and legal persons must show that they have an interest in bringing proceedings. Both requirements must be satisfied cumulatively for the action to be admissible (Bionorica SE and Diapharm GmBH & Co KG, para 106). A fundamental prerequisite for bringing proceedings is that legal and natural persons must demonstrate that they have a ‘vested and current’ interest and that such interest does ‘not concern a future and hypothetical situation’ (Bionorica SE and Diapharm GmBH & Co KG, para 84). As the Court has explained, the very aim of the application should be that ‘if successful, [it] procure[s] an advantage to the party bringing it’ (Case C-362/05 P Wunenburger v Commission EU:C:2007:322, para 42). The procedure is divided into a pre-judicial or administrative phase, whereby the applicant must first call upon the institution to act within two months and indicate which measures the applicant would like the institution to take (Joined Cases 114–117/ 79 Fournier and Others v Commission [1980] ECR 1529, 1531). Only after giving the institution the opportunity to reply to this call can the applicant bring an action before the Court. Should the institution fail to define its position, the applicant has a further two months to bring an action (Magnan, para 23). Given that the institution only

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needs to explain its position, very few actions under Article 265 TFEU have been successful. In Case T-74/92 Ladbroke Racing Deutschland GmbH v Commission [1995] ECR II-115, Ladbroke asked the Commission to explain the denial of access for the televising of horse racing, which, it believed, breached competition rules under Articles 85 and 86 TEEC (now Articles 101 and 102 TFEU). As the Commission failed to clarify its position, Ladbroke brought under Article 175 TEEC (now Article 265 TFEU). The Court ruled that the Commission had

e cas ple m exa an action

failed to address to the applicant a measure other than a recommendation or an opinion, in so far as it failed either to initiate the procedure for establishing breach of Article [102] of the Treaty, so that a decision confirming such a breach could be adopted, or to dismiss the complaint after having sent the applicant a letter under Article 6 of Regulation No 99/63, or, finally, to make a duly reasoned decision not to pursue the complaint on the ground of lack of [EU] interest. (para 69) This means that if an institution decides not to pursue an investigation or to act, this may in itself constitute a decision that can then be challenged as failure to act (Case C-39/93 SFEI and others v Commission [1994] ECR 2681, paras 27–28).

A ruling by the Court stating the failure to act obliges the institution to take the necessary measures under Article 266 TFEU (see 10.2.5 above): The effect of that declaration, under Article [266], is that the defendant institution is required to take the necessary measures to comply with the judgment of the Court, without prejudice to any actions to establish non-contractual liability to which the aforesaid declaration may give rise. (Re Budgetary Procedure, para 9) That being said, the Court does not issue directions to the institutions or substitute itself for them (Case T-19/90 Von Hoessle v Court of Auditors [1991] ECR II-615, para 30). This means that the institutions are given discretion as to how best to implement the ruling. Further, a reasonable period of time is given to the particular institution to remedy the omission (Re Transport Policy, para 69).

10.4 Plea of illegality Article 277 TFEU offers an additional, incidental form of action to Article 263 TFEU. It states: Notwithstanding the expiry of the period laid down in Article 263, sixth paragraph, any party may, in proceedings in which an act of general application adopted by an institution, body, office or agency of the Union is at issue, plead the grounds specified in Article 263, second paragraph, in order to invoke before the Court of Justice of the European Union the inapplicability of that act. The provision may be used during proceedings (eg within the framework of enforcement proceedings under Article 258 TFEU (see Chapter 7)) before the CJEU only when the argument of illegality is brought forward in relation to the subject matter of the procedure. In practice, rather than being an action, it is an argument. As the Court has stressed in Joined Cases 87/77, 130/77, 22/83, 9/84 and 10/84 Salerno and others v Commission and Council [1985] ECR 2523: [T]he sole purpose of Article [277] is to protect parties against the application of an unlawful regulation where the regulation itself can no longer be challenged

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owing to the expiry of the period laid down in Article [263]. However, in allowing a party to plead the inapplicability of a regulation, Article [277] does not create an independent right of action; such a plea may only be raised indirectly in proceedings against an implementing measure, the validity of the regulation being challenged in so far as it constitutes the legal basis of that measure. (para 36) Consequently, it is a collateral review of a parent act. The plea of illegality is often used to challenge decisions based on EU regulations (parent act), the validity of which is questioned. Yet, to limit recourse to this type of plea, the Court has explained that whilst it allows for a party to raise this argument after the deadline set out in Article 263 TFEU has passed, it will not entertain such a plea if the party had the opportunity to challenge it earlier under Article 263 TFEU but failed to do so. For example, in Case 156/77 Commission v Belgium [1978] ECR 1881, the Court refused to consider the plea of illegality of a Member State addressee of a decision as this could have been done under Article 263 TFEU. Generally, the Court has been reluctant to grant privileged applicants under Article 263 TFEU legal standing under Article 277 TFEU. Whereas the Court accepts that individuals faced with the hurdles of proving locus standi under Article 263 TFEU can use Article 277 TFEU on the basis that they were unable to challenge the act under Article 263 TFEU, it refuses to give standing to individuals under Article 277 TFEU if there is no doubt that they would have had locus standi under Article 263 TFEU (TWD Textilwerke Deggendorf GmbH). In other words, Article 277 TFEU compensates for the tight locus standi rules for non-privileged applicants under Article 263 TFEU (Case 92/ 78 SpA Simmenthal v Commission [1979] ECR 777, paras 39–41). Furthermore, the Court will not examine such a plea if the matter is pending before a national court. Indeed, Article 277 TFEU should not be used as a means to make a direct request to the CJEU for a preliminary ruling (Joined Cases 31/62 and 33/62 Milchwerke Heinz Wöhrmann & Sohn KG and Alfons Lütticke GmbH v Commission [1962] ECR 155, at 507). This is to ensure a clear division of jurisdiction between the CJEU and the national courts. Any act of general application capable of producing legally binding effects may be challenged. The grounds for review are identical to those under Article 263 TFEU (lack of competence, infringement of procedural requirement, infringement of the Treaty, misuse of power). The effect of a successful plea of illegality is that the act is declared inapplicable to the applicant’s case, though it is not annulled as it cannot be challenged under Article 263 TFEU any longer. However, to comply with a ruling under Article 266 TFEU, the institution that adopted the act often amends or repeals it.

10.5 Extra-contractual liability The TFEU contains rules regarding the liability of the Union for damage caused by its institutions, which can mainly be divided into contractual liability (Article 340, first paragraph TFEU) and extra-contractual liability (Article 340, second paragraph TFEU). Article 340, second paragraph TFEU provides that:

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In the case of non-contractual liability, the Union shall, in accordance with the general principles common to the laws of the Member States, make good any damage caused by its institutions or by its servants in the performance of their duties. This is another mechanism to ensure that the European institutions act in accordance with EU law. As a result, Article 268 TFEU stipulates that: The Court of Justice of the European Union shall have jurisdiction in disputes relating to compensation for damage provided for in the second and third paragraphs of Article 340.

10.5.1 Admissibility of the action Although EU liability is based on a Treaty provision, the Court has developed a regime of liability in accordance with the general principles common to the laws of the Member States (see 4.3). In Joined Cases C-46 and 48/93 Brasserie du Pêcheur SA v Germany and R v Secretary of State for Transport, ex parte Factortame Ltd and Others [1996] ECR I-1029, the Court explained: The principle of the non-contractual liability of the [Union] expressly laid down in Article [340] of the Treaty is simply an expression of the general principle familiar to the legal systems of the Member States that an unlawful act or omission gives rise to an obligation to make good the damage caused. That provision also reflects the obligation on public authorities to make good damage caused in the performance of their duties. (para 29) It is noteworthy that fault is not a prerequisite for liability (Joined Cases C-363/88 and C-364/88 Finanziaria Siderurgica Finsider SpA (in liquidation), Italsider SpA (in liquidation) and Societa Acciaierie e Ferriere Lombarde Falck SpA v Commission EU:C:1992:44, para 22). In fact, EU institutions may be held liable for any damage caused by a lawful act (however, this is not dealt with in this chapter). The aim of Article 340, second paragraph TFEU is to provide compensation for such damage, but not to obtain the abolition of the measure itself or oblige an institution to take action. Separate proceedings need to be lodged for these purposes. The Court describes Article 340, second paragraph as an autonomous form of action against acts of the EU institutions, unrelated to Article 263 TFEU (see 10.2) (Case 5/71 Aktien-Zuckerfabrik Schöppenstedt v Council [1971] ECR 975, para 3) and Article 265 TFEU (see 10.3) (Case 4/69 Alfons Lütticke GmbH v Commission [1971] ECR 325, para 6). As the Court explains in Case C-234/02 P European Ombudsman v Lamberts EU:C:2004:174: although actions for annulment and for failure to act seek a declaration that a legally binding measure is unlawful or that such a measure has not been taken, an action to establish liability seeks compensation for damage resulting from a measure or from unlawful conduct, attributable to a [Union] institution or body. (para 59) However, to safeguard the coherence of the EU legal system, the Court can use findings stemming from other EU judicial actions (Case C-123/18 P HTTS Hanseatic Trade Trust & Shipping GmbH v Commission EU:C:2019:694, paras 40–41).

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The parties involved are the party who suffered damage and the specific institution whose action or omission is at issue. In contrast to other forms of actions against EU institutions, there are no limitations as to who can bring such an action (Case 118/83 CMC Cooperativa muratori e cementisti and others v Commission [1985] ECR 2325, para 31): Any person who claims to have been injured by such acts or conduct must therefore have the possibility of bringing an action, if he is able to establish liability, that is, the existence of damage caused by an illegal act or by illegal conduct on the part of the [Union]. Action must, however, be brought against an official act of an institution of the Union or its civil servants. In Case C-370/89 Société Générale d’Entreprises ElectroMécaniques SA (SGEEM) and Etroy v European Investment Bank [1992] ECR I-6211, the Court clarified that a broad definition must be given to the word ‘institution’ (para 16). As the Court stated in Case T-680/13 Chrysostomides & Co LLC v Council EU:T:2018:486: That term also covers, with regard to the system of non-contractual liability established by the TFEU, all other EU bodies established by the Treaty and intended to contribute to achieving the EU’s objectives. (para 82) As a result, proceedings may also be brought against the European Ombudsman (European Ombudsman v Lamberts), the Research Executive Agency (Case T-706/14 Holistic Innovation Institute, SLU v Agence exécutive pour la recherche EU:T:2017:89) and the European Central Bank (Case T-107/17 Steinhoff and Others v European Central Bank EU:T:2019:353). Action can also be taken against the CJEU. There are chiefly two types of claims against the CJEU: (1) those that claim damages in respect of alleged harm due to the excessive duration of the proceedings before the Court (see eg Case T-577/14 Gascogne Sack Deutschland GmbH and Gascogne v European Union EU:T:2017:1, para 78; Case T-479/14 Kendrion NV v European Union EU:T:2017:48, para 63 confirmed by Case C150/17 P European Union v Kendrion NV EU:C:2018:1014, para 73); and (2) those that allege that as a result of an ‘unlawful’ judgment the applicant has suffered damage. For example, in Case C-346/17 P Klein v Commission EU:C:2018:679, the Court of Justice found that ‘the General Court distorted the facts submitted for its assessment’ (para 132). It should be stressed that, according to Guardian Europe: the European Union cannot incur liability for the content of a judicial decision that has not been delivered by an EU court adjudicating at last instance and could, therefore, be subject to an appeal. (10.2.3 above, para 122) Furthermore, the act must be attributable to a specific institution or institutions (see eg Case T-383/00 Beamglow Ltd v European Parliament and Others [2005] ECR II-5465) and not to the EU as a whole (Joined Cases 63 to 69/72 Werhahn Hansamühle and others v Council [1973] ECR 1229) or to the Member States (Case 169/73 Compagnie Continentale France v Council [1975] ECR 117). The act must also be attributable to the EU and not to national authorities. Damage caused by national authorities are to be examined by national courts who have exclusive jurisdiction to determine and order compensation (Case 175/84 Krohn Import-Export v Commission EU:C:1986:85, para 18). The Court will, however, accept to examine an action under Article 340 TFEU if it can be proven that the responsibility is that of the EU and ‘cannot be regarded, in reality, as attributable to the national authority’ (Chrysostomides, para 84). It should be

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noted that this element is examined sometimes in the section ‘admissibility’ (eg Case T-289/13 Ledra Advertising Ltd v Commission and European Central Bank EU:T:2014:981, paras 39–46) or ‘jurisdiction of the Court’ (see Chrysostomides) and sometimes in the section ‘substance’. This is so because the assessment of whether the act or conduct can be attributed to the EU is relevant in the context of both the assessment of the Court’s jurisdiction and the examination of the substance of the action (usually when determining the causal link between the act and the damage (see below 10.5.2)) – though the Court seems to understand imputability as a separate substantive requirement as Case T-317/12 Holcim (Romania) SA v Commission EU:T:2014:782, para 86, and Case T-531/14 Sotiropoulou v Council EU:T:2017:297, para 57, suggest. In accordance with Article 46 of the Statute of the Court of Justice, an applicant needs to start proceedings within five years from the time of the injury, ie the day the damage has materialised. The justification for this five-year period is twofold. First, it ensures that the claimant has enough time to gather all relevant information to pursue an action. Secondly, it prevents claimants from being able to delay almost indefinitely their right to action (HTTS, para 49). Article 46 also stipulates: The period of limitation shall be interrupted if proceedings are instituted before the Court of Justice or if prior to such proceedings an application is made by the aggrieved party to the relevant institution of the Union. In the latter event the proceedings must be instituted within the period of two months provided for in Article 263 of the Treaty on the Functioning of the European Union; the provisions of the second paragraph of Article 265 of the Treaty on the Functioning of the European Union shall apply where appropriate. However, the Court has interpreted that provision in Case 145/83 Adams v Commission [1985] ECR 3539 as meaning that the expiry of the limitation period cannot constitute a valid defence to a claim by a person who has suffered damage where that person only belatedly became aware of the event giving rise to it and thus could not have had a reasonable time in which to submit his application to the Court or to the relevant institution before the expiry of the limitation period. (para 50)

10.5.2 Requirements for a right to damages The history of the criteria to be fulfilled for an action for damages for EU liability has been rather confusing. This is mainly due to the fact that, as with judicial review under Article 263 TFEU (10.2 above), the Court of Justice was initially very wary of actions being brought against EU institutions. For many years, the Court distinguished between claims involving administrative acts and those involving legislative acts. Administrative acts placed EU institutions under a duty of good administration (eg, adopting satisfactory procedures; obtaining the relevant facts before making decisions and not giving misleading information; adequately supervising bodies to whom power has been delegated). If illegal conduct, damage and a causal link could be established for administrative acts then liability could be proven.

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As for legislative acts, they were categorised into those involving ‘economic policy choices’ and other acts. Establishing EU liability for the former faced a graver hurdle, involving the so-called Schöppenstedt formula: Where legislative action involving measures of economic policy is concerned, the [Union] does not incur non-contractual liability for damage suffered by individuals as a consequence of that action, by virtue of the provisions contained in Article [340], second paragraph, of the Treaty, unless a sufficiently flagrant violation of a superior rule of law for the protection of the individual has occurred. For that reason the Court, in the present case, must first consider whether such a violation has occurred. (Case 5/71 Aktien-Zuckerfabrik Schöppenstedt v Council [1971] ECR 975, para 11, emphasis added) In other words, for such a legislative act to be considered as ‘illegal conduct’, three requirements had to be met: (a) There had to be a breach of a superior rule of law (eg, the principle of legitimate expectation in Case 74/74 Comptoir national technique agricole (CNTA) SA v Commission [1975] ECR 533). (b) The breach must have been sufficiently serious. This was understood to mean that the institution had ‘manifestly and gravely disregarded the limits on the exercise of its power’ (Joined Cases 83 and 94/76, 4, 15 and 40/77 Bayerische HNL Vermehrungsbetriebe GmbH & Co KG and Others v Council and Commission (Re Skimmed-Milk Powder) [1978] ECR 1209) (see further discussion below). (c) The superior rule of law must have been one for the protection of the individual. For example, in Joined Cases 56 to 60/74 Kurt Kampffmeyer Mühlenvereinigung KG and Others v Commission and Council [1976] ECR 711, the Court explained that the support for agricultural markets was intended to benefit the interests of individuals such as importers. Conditions for EU liability for act by an institution

Actual damage

Causal link

Illegal conduct

Administrative act

Legislative act Involving ‘economic policy choices’ (Schöppenstedt) Breach of superior rule of law Breach must be sufficiently serious For protection of individual

Figure 10.5 Historical conditions for EU liability for an act by an institution

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The Court now clearly rejects this distinction between administrative and legislative acts, as clearly stated in Case T-399/17 Dalli v Commission EU:T:2019:384: except in such cases concerning actions in civil service matters, the EU Courts have not established a non-contractual liability regime based on administrative activity distinct from the system of non-contractual liability based on legislative activity. It does not follow from the case-law that, except in actions in civil service matters, it is not necessary to establish the existence of a sufficiently serious breach of a rule of law intended to confer rights on individuals in order to engage the EU’s non-contractual liability, where the alleged unlawful acts are connected with the administrative activity of the institution concerned. On the contrary, it follows from the case-law that the requirement that such a breach be established is applicable both in the legislative activity and in the administrative activity of the institutions. (para 48) That being said, following its Francovich ruling on Member State liability (Joined Cases C-6 and 9/90 Francovich v Italy [1991] ECR I-5357; see 7.3), the Court has attempted to simplify and to unify State liability and EU liability regimes. Consequently, the requirements for Member State and EU liability are now similar (see Figure 10.6). In Case C-352/98P Laboratoires Pharmaceutiques Bergaderm SA and Goupil v Commission [2000] ECR I-5291, para 41: The Court has stated that the conditions under which the State may incur liability for damage caused to individuals by a breach of [Union] law cannot, in the absence of particular justification, differ from those governing the liability of the [Union] in like circumstances. The protection of the rights which individuals derive from [EU] law cannot vary depending on whether a national authority or a [EU] authority is responsible for the damage (Brasserie du Pêcheur/Factortame, para 42). Conditions for EU liability (Bergaderm)

Actual and certain damage

Causal link

Unlawfulness of conduct of EU institutions Breach of a rule of law for protection of individual or that is intended to confer rights on individuals Breach must be sufficiently serious

Figure 10.6 Current conditions for EU liability

There are three circumstances in which the Union might be liable. (a) The first situation involves loss caused by servants of the EU in the performance of their duties. The Court has interpreted this liability criterion in a very strict manner (see, eg, Case 9/69 Sayag and SA Zurich v Leduc, Thonnon and SA La Concorde [1969] ECR 329; Joined Cases 169/83 and 136/84 Leussink and others v Commission [1986] ECR 2801).

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(b) The second situation involves an omission by an institution where the institution concerned had a legal obligation to act under a provision of EU law. As the Court explained in Case C-146/91 Koinopraxia Enóséon Georgikon Synetairismon Diacheiríséos Enchorion Proïonton Syn PE (KYDEP) v Council and Commission [1994] ECR I-4199: As a preliminary point it should be remembered that omissions by the [Union] institutions give rise to liability on the part of the [Union] only when the institutions have infringed a legal obligation to act under a provision of [EU] law. (para 58) (c) The third and more usual type of action relates to the EU’s liability for loss caused by the actions of its institutions. Union liable for

Loss caused by EU civil servants in the performance of their duties

Figure 10.7

Omission by institution where institution is obliged to act under a provision of EU law

Loss caused by actions of institutions

Circumstances in which the Union might be liable

As explained by the Court in Case C-120/06 P and C-121/06 P FIAMM and Others v Council and Commission [2008] ECR I-06513: [t]he exercise of the right to compensation for damage suffered depend[s] on the satisfaction of a number of conditions, namely the unlawfulness of the conduct of which the institutions are accused, the fact of damage and the existence of a causal link between the conduct and the damage complained of. (para 106; see also Case T-399/17 Dalli v Commission EU:T:2019:384, para 45) All three requirements must be satisfied, which means that if one of them is not met then the entire action must be dismissed in its entirety (Case C-104/97 P Atlanta AG v European Community [1999] ECR I-06983, para 65). Further, the Court is not obliged to examine these requirements in a specific order (Case C-257/98 P Lucaccioni v Commission EU:C:1999:402, para 13). The first requirement is that the conduct of the EU institution is unlawful. To determine the unlawfulness of the act or conduct, the Court requires that the alleged breach constitutes a sufficiently serious infringement of a rule of EU law intended to confer rights upon individuals (Ledra and Others, para 66). Under the Bergaderm jurisprudence two elements must be met (para 42): (a) A rule of law for the protection of the individual, or intended to confer rights on individuals, must be infringed. This ‘requirement is satisfied where that rule creates an advantage which could be defined as a vested right, is designed for the protection of the interests of individuals or entails the grant of rights to individuals, the content of those rights being sufficiently identifiable’ (Case T-217/ 11 Staelan v European Ombudsman EU:T:2015:238, para 73). The requirement is fulfilled by, for example, the principle of non-discrimination (Case T-166/98 Cantina sociale di Dolianova Soc coop rl and Others v Commission [2004] ECR II3998), the duty of confidentiality of the EU institutions, the right to property (Ledra and Others), the principle of due diligence (Case C-337/15 P European

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Ombudsman v Staelen EU:C:2017:256) which is inherent in the principle of sound administration (Case T-399/17 Dalli v Commission EU:T:2019:384, para 59), the principle of legitimate expectations, the principle of legal certainty, the principle of effective judicial protection (Case C-556/14 P Holcim (Romania) SA v European Commission EU:C:2016:207), and the right to a fair and public hearing within a reasonable time by an independent and impartial tribunal previously established by law (Case C-385/07 P Der Grüne Punkt – Duales System Deutschland GmbH v Commission [2009] ECR I-6155, para 178). However, the fact that the Commission exceeds the powers it has been granted by the Council, thereby violating the division of powers, is not to be considered as a rule for the protection of the individual; rather, the principle of institutional balance (see 2.2.1 and 5.2.1) is a rule for the benefit of the EU (Joined Cases T-64/01 and T-65/01 Afrikanische Frucht-Compagnie GmbH and Internationale Fruchtimport Gesellschaft Weichert and Co v Council and Commission [2004] ECR II-527). The same holds true of the principle of subsidiarity (see 3.4.1) which cannot be used by natural and legal persons for an action under Article 340 TFEU (Sotiropoulou, para 72). (b) The breach must be sufficiently serious. The Court stresses that ‘the decisive test for finding that a breach of [Union] law is sufficiently serious is whether … the [EU] institution concerned manifestly and gravely disregarded the limits on its discretion’ (Bergaderm, para 43; see also Case C-234/02 P European Ombudsman v Lamberts EU:C:2004:174, para 49). In Case C-312/00 P Commission v Camar Srl and Tico Srl [2002] ECR I-11355, the Court stated that ‘the decisive test for determining whether there has been such an infringement is not the individual nature of the act in question, but the discretion available to the institution when it was adopted’ (para 55). The Court thereby highlights that the nature of the act is important only inasmuch as it is a pointer to the degree of discretion enjoyed by the institution. The Court has explained that the reason for this requirement stems from the need to strike a balance between, on the one hand, the protection of individuals against unlawful conduct of the institutions and, on the other, the leeway that must be accorded to the institutions in order not to paralyse action by them. (HTTS (10.5.1 above), para 34) In cases where there is no or limited discretion, the mere infringement of EU law may be sufficient to determine the existence of a ‘sufficiently serious breach’ (Bergaderm, para 44; see also Staelan, para 71). Similarly, a breach of a general obligation of diligence (Case C-308/87 Grifoni v European Atomic Energy Community (No 1) [1990] ECR I-1203), or a misapplication of the relevant substantive or procedural rules (Kampffmeyer), may lead to a finding of a ‘sufficiently serious breach’. In cases where the institution has been provided with some degree of discretion, the applicant must demonstrate some degree of blameworthiness. As the Court explains in Case T-351/03 Schneider Electric SA v Commission [2007] ECR II-2251: … the right to compensation for damage resulting from the conduct of the institution becomes available where such conduct takes the form of action manifestly contrary to the rule of law and seriously detrimental to the interests of persons outside the institution and cannot be justified or accounted for by the particular constraints to which the staff of the institution, operating normally, is objectively subject. (para 124)

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Following Case C-282/05 P Holcim (Deutschland) AG v Commission [2007] ECR I2941, the Court, in addition to examining the margin of discretion available to the author of the act in question, examines the complexity of the situations that need to be regulated, the difficulty in the application or interpretation of the legislation and, more particularly, the margin of discretion available to the author of the act in question. An example of a serious breach is the infringement of the fundamental right to have a case dealt with within a reasonable time (Case C-385/07 P Der Grüne Punkt – Duales System Deutschland GmbH v Commission [2009] ECR I-6155, paras 167–96, esp 188: General Court’s failure to complete within a reasonable time proceedings concerning the infringement of competition rules; see also Case T-479/14 Kendrion NV v EU EU:T:2017:48, para 63). The Court has also specified that ‘sufficiently serious breach … is a static concept, fixed at the time when the unlawful act or conduct was adopted’ (HTTS, para 55). The second requirement is that damage can be shown. The Court has recognised that the concept of damage ‘is by nature a dynamic concept since, first, the damage may emerge after the unlawful act or conduct was adopted and, second, its extent may change over time’ (HTTS, para 55). The amount claimed must be actual, certain and concrete (Case 26/74 Société Roquette Frères v Commission [1976] ECR 677). If the actual damage cannot be established, it must be at least imminent (Kampffmeyer) and foreseeable with sufficient certainty. Furthermore, the Court stipulated in Mulder and Others (Joined Cases C-104/89 and 37/90 Mulder and Others v Council and Commission [1992] ECR I-3061) that the extent of ‘the damage alleged must go beyond the bounds of the normal economic risks inherent in the activities in the sector concerned’ (para 13). In addition, there can be no compensation for anticipated profits (Comptoir national technique agricole). The applicant must ‘adduce conclusive proof as to the existence and extent of the damage he alleges’ (Case C-362/95 P Blackspur DIY Ltd and Keller, Glancy and Cohen v Council [1997] ECR I-4775, para 31). In fact, the submission must contain information enabling the Court to identify the damage and assess its extent and nature (Joined Cases T-481/93 and T-484/93 Vereniging van Exporteurs in Levende Varkens and others and Nederlandse Bond van Waaghouders van Levend Vee and others v Commission EU:T:1995:209, para 75), a requirement that is also applicable to nonmaterial damage (Case C-460/09 Inalca SpA – Industria Alimentari Carni and Cremonini SpA v Commission EU:C:2013:111, para 103). Whilst it might be difficult to demonstrate the existence of the non-material damage and to establish its extent, the Court has accepted that the applicant needs to ‘prove that the [institution’s] conduct of which it complains was, by reason of its gravity, such as to cause it damage of that kind’ (Case T-230/95 Bretagne Angleterre Irlande (BAI) v Commission EU:T:1999:11, para 39). The Court has accepted that non-material damage, such as damage to the reputation of the company and uncertainty impacting on decision-making and the running of a business (Case T-577/14 Gascogne Sack Deutschland GmbH and Gascogne v European Union EU:T:2017:1, paras 154 and 157) or psychological harm (Staelen, paras 129–130), can be compensated too. This strict approach to the definition of ‘damage’ is explained by the third requirement, that is that there must be a direct causal link between the breach and the damage suffered. The Court explained in Joined Cases 64 and 113/76, 167 and 239/78, 27, 28 and 45/79 P Dumortier Frères SA and Others v Council [1979] ECR 3091 that there is no obligation for the Union ‘to make good every harmful consequence, even a remote one, of unlawful legislation’; the damage alleged must ‘be a sufficiently direct

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consequence of the unlawful conduct’ of the institution concerned (para 21). In particular, the Court has explained in Case C-419/08 P Trubowest Handel GmbH and Makarov v Council and Commission EU:C:2010:147 that even in the case of a possible contribution by the institutions to the damage for which compensation is sought, that contribution might be too remote because of some responsibility resting on others, possibly the applicant. (para 59) The burden of proving the causal link is on the applicant (Case 40/75 Société des produits Bertrand SA v Commission [1976] ECR 1). The Court has qualified this link as being a ‘sufficiently direct causal nexus between the conduct of the institutions and the damage’ (Beamglow (10.5.1 above), para 193). The causal link may be severed, however, by contributory negligence in the sense that contributory negligence will lessen the amount of damages awarded to the individual (Adams (10.5.1 above) and Schneider Electric). Lastly, in its judgment on liability, the Court will specify the obligation of the EU to pay compensation and fix the amount of damages awarded.

10.6 Further reading Balthasar S, ‘Locus Standi Rules for Challenges to Regulatory Acts by Private Applicants: The New Article 263(4) TFEU’ (2010) 35 EL Rev 542. Buchanan C, ‘Towards a Definition of “Implementing Measures” under Article 263, Paragraph 4, TFEU’ (2015) 6 European Journal of Risk Regulation 671. Craig P, ‘The ECJ and Ultra Vires Action: A Conceptual Analysis’ (2011) 48 CML Rev 395. Gutman K, ‘The Evolution of the Action for Damages against the European Union and its Place in the System of Judicial Protection’ (2011) 48 CML Rev 695. Havu K, ‘Damages Liability for Non-Material Harm in EU Case Law’ (2019) 44 EL Rev 492. Kornezov A, ‘Locus Standi of Private Parties in Actions for Annulment: Has the Gap been Closed?’ (2014) 73 Cambridge Law Journal 25. Mastroianni R, ‘Striking the Right Balance: Limits on the Right to Bring an Action under Article 263(4) of the Treaty on the Functioning of the European Union’ (2015) 30 American University International Law Review 743. Peers S and Costa N, ‘Judicial Review of EU Acts after the Treaty of Lisbon; Order of 6 September 2011, Case T-18/10 Inuit Tapiriit Kanatami and Others v. Commission & Judgment of 25 October 2011, Case T-262/10 Microban v. Commission’ (2012) 8 EuConst 82. Turk A, Judicial Review in EU Law (Edward Elgar, 2009). van Malleghem P-A, ‘Before the Law Stands a Gatekeeper – Or What Is a “Regulatory Act” in Article 263(4) TFEU? Inuit Tapiriit Kanatami’ (2014) 51 CML Rev 1187. Verbruggen P and Kryla-Cudna K, ‘The Union’s Liability for Failure to Adjudicate within a Reasonable Time: EU Tort Law after Gascogne, Kendrion and ASPLA’ (2020) 57 CML Rev 191. Wakefield J, ‘The Changes in Liability of EU Institutions: Bergaderm, FIAMM and Schneider’ (2012) 12 ERA Forum 625. Werkmeister C, Pötters A and Traut J, ‘Regulatory Acts within Article 263(4) TFEU – A Dissonant Extension of Locus Standi for Private Applicants’ (2012) 13(1) Cambridge Yearbook of European Legal Studies 311.

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In conformity with the principle of the rule of law, the drafters of the EU Treaties have set up a comprehensive system (judicial review, plea of illegality, failure to act, EU extra-contractual liability) to ensure that acts of the EU may be reviewed and challenged in a court of law. That being said, whilst the Court has consistently reiterated that individuals should be provided with effective remedies at the national level (through the principles of supremacy, direct effect and State liability), it has been more reluctant to grant individuals such remedies against EU acts. Test Your Knowledge

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At a family occasion on 1 August 2019, your cousin, David, tells you that in June 2019 the Shale Gas Industries Association informed him that on 10 March 2019 the European Parliament and the Council passed an EU Regulation that will adversely affect his business. There are about 50 registered companies in the Association, many of which will, as a result of this Regulation, have to make extensive and expensive changes to their method of extracting gas. The smaller companies (including David’s company) will not be able to afford such changes and will have to wind down. David is very upset because a previous Regulation had offered financial support for the creation of small companies in the oil industry. If such financial support had not been given, David would not have set up his company. During the conversation, David asks you whether it is possible to have this EU Regulation repealed. (a) What are the grounds on the basis of which this Regulation can be reviewed? (b) Would David be able to challenge it under Article 263, fourth paragraph TFEU? (c) Would David be able to obtain compensation under Article 340, second paragraph TFEU? There was a surplus of Kabuli-chickpeas within the EU in 2018, and as a result (fictitious) Council Regulation 11/2019 was enacted on 25 January 2019. Exporters of Kabuli-chickpeas during 2019 were entitled under the Regulation to incentives of £100 per ton of Kabuli-chickpeas exported. On 26 January 2019, BEyed Peas BV applied for a licence to export 1,000 tons of Kabuli-chickpeas. The company was granted the licence on the payment of a deposit of £5,000, which would be forfeited if the company did not comply with the requirements of the licence. In February 2019 there was serious disruption of the Kabuli-chickpea crop, which resulted in a shortage of Kabuli-chickpeas in the EU, and on 22 February 2019 the Commission enacted Regulation 13/2019, which eliminated the refund subsidies of Kabuli-chickpeas, making exporters liable instead for a levy of £5 per ton exported. Regulation 13/2019 specifically included those who had already exported Kabuli-chickpeas in the 2019 marketing year, but did not contain reasons for its issue. B-Eyed Peas BV exported 400 tons of its quota before 22 February 2019 and is now presented with a levy of £2,000. It must export the remaining quantity of its quota (600 tons) or lose the deposit of £5,000. Exporting the 600 tons will, however, make it liable to a further levy of £3,000. Advise B-Eyed Peas BV on whether, and on what grounds, if any, it may successfully challenge Regulation 13/2019.

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Article 340, second paragraph TFEU is one of the essential safeguards in the EU legal order for ensuring that EU institutions act in compliance with the Treaties. Do you agree? It is argued that despite the wide range of actions possible against acts of the EU institutions, there are situations where an aggrieved individual is left without any judicial remedy whatsoever. Is this true? Discuss.

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PART IV

TRADE WITHIN THE INTERNAL MARKET 11 The Internal Market and Harmonisation

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12 The Free Movement of Goods: The Customs Union and the Abolition of Tariff Barriers

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13 The Free Movement of Goods: The Abolition of Non-tariff Barriers

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14 The Free Movement of Goods: Derogations and Justifications

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15 Freedom to Exercise an Economic Activity

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After reading this chapter, you will be able to understand: • • • • • • •

the concept of the internal market its development from the Single European Act the challenges faced by the internal market in the 21st century the Single Market Acts the estimated benefits of the internal market the internal market as the main object of the harmonisation process the methods of harmonisation.

11.1 Introduction The idea of the internal market, which enshrined the objective of exponential economic prosperity through the abolition of all trade barriers and the liberalisation of exchanges of goods, services and capital, was conceived of by the drafters of the Treaty of Rome, but only became a reality in January 1993. Although a Customs Union had been achieved on 1 July 1968, progress in eliminating national technical rules governing products and the provision of services, anti-competitive practices and State aid was rather slow. The maintenance of internal frontiers meant that the European market was a common market in name only. The objective of creating a genuine single market was reinvigorated under the Single European Act 1986 (SEA). This first amendment to the Treaty of Rome formalised the concept of the ‘internal market’ as an area without internal borders, within which the free movement of human and materials resources is ensured. It also set a clear timetable and deadline for the removal of all existing barriers. Although there is clear evidence that the impact of the launch of the internal market under the SEA has been positive, the internal market cannot be taken for granted, and is an ongoing process that now has to face, and adapt to, new challenges from globalisation, EU enlargement, innovation, and social and environmental developments. The internal market covers not only the 27 EU Member States, but also three European Free Trade Area (EFTA) States – Iceland, Liechtenstein and Norway – as a result of their membership of the European Economic Area (EEA), and Switzerland as a result of agreements with the EU. Harmonisation of national legislation is one of the most effective instruments to ensure freedom of movement of goods, services, capital and persons in a single market. Yet, although provided for in the Treaty of Rome, harmonisation proved to be a long, cumbersome process, which hampered rather than supported the common market. Combined with a new requirement of qualified majority voting (see 2.3.2.3), introduced under the SEA and replacing the original requirement for unanimity, the new approach (see 11.3.3.2), developed by the European Commission in its 1985

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White Paper, Completing the Internal Market (COM(85) 310 final, 14 June 1985), became instrumental in the creation and the completion of the 1993 internal market.

11.2 From the common market to the internal market Original Article 8 of the European Economic Community (EEC) Treaty provided for the progressive establishment of the common market over a transitional period of 12 years, divided up into three stages of four years each and ending on 1 January 1970. Yet the Customs Union was achieved by a decision of the Council of Ministers of 1 July 1968, 18 months before the deadline. However, if customs duties and quantitative restrictions were abolished by the end of the transitional period, the free movement of goods, persons, services and capital was far from being completed by then. The economic recession in the 1970s further hindered this process. As Member States were increasingly seeking to protect their markets and national industries, non-tariff barriers, far from being abolished, multiplied, and provisions on restrictions to the freedom to provide services failed to be implemented, not only during the transitional period but at all.

11.2.1 The road to the Single European Act At the European summits of Copenhagen in 1982, Fontainebleau in June 1984 and Dublin in December 1984, the Heads of State and Governments pledged themselves to give the completion of the common market the highest priority. The Commission was finally called upon by the European Council, at the summit of March 1985, to draw up a detailed programme of measures and a timetable, with a view to abolishing the remaining obstacles to that goal. The Commission, under the chairmanship of Lord Cockfield, its Vice-President responsible for the internal market, drafted a White Paper within seven weeks, entitled Completing the Internal Market. This was presented to the European Council of Milan in June 1985. The Commission pointed out that, despite the long existence of the then European Community, the common market was still plagued with barriers to free movement. It notably identified three types of such remaining obstacles: (a) physical barriers, ie customs formalities for goods and individuals; (b) technical barriers, such as sets of national rules and measures intended to obstruct free trade directly or indirectly, thus making standardisation or mutual recognition of technical standards necessary; and (c) fiscal barriers arising from various national rates of indirect taxes, such as value added tax or excise duties. The Commission laid down a comprehensive programme and schedule for the abolition of these barriers, the approximation of legislation and taxes, and further monetary cooperation. For the implementation of this programme to be possible, the Member States adopted the SEA (on 17 and 28 February 1986) in order to amend the EEC Treaty, as well as the European Coal and Steel Community (ECSC) and the European Atomic Energy Community (EAEC) or EURATOM Treaties. This was the first major revision of the Treaties of Rome and Paris (see 1.5).

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11.2.2 The Single European Act and the internal market 11.2.2.1

Common market and internal market With the SEA, the new term ‘internal market’ was coined to replace ‘common market’. Article 13 SEA added a new Article 8a to the EEC Treaty (now Article 26(2) TFEU), which reads: 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 this Treaty. Although the expressions ‘common market’, on the one hand, and ‘internal market’ (or ‘single market’ as it is often referred to by the European Commission), on the other, had been treated as synonymous, it had been argued that the two concepts have different scopes. A broad definition of the concept of ‘common market’ can be found in the ruling of the Court of Justice in Case 15/81 Schul Douane Expediteur BV v Inspecteur der Invoerrechten en Accijnzen, Roosendaal [1982] ECR 1409: The concept of common market as defined by the Court in a consistent line of decisions involves the elimination of all obstacles to intra-[Union] trade in order to merge the national markets into a single market bringing conditions as close as possible to those of a genuine internal market. It is important that not only commerce as such but also private persons who happen to be conducting an economic transaction across national frontiers should be able to enjoy the benefits of that market. (para 33) From this extract it is clear that, from 1982, the Court used the three expressions ‘common market’, ‘internal market’ and ‘single market’ interchangeably. But were the concepts of ‘internal market’ or ‘single market’ similar to that of ‘common market’, or did their content and objectives have to be understood in a wider context? Article 13 SEA defined the internal market as an ‘area without internal frontiers in which the free movement of goods, persons, services and capital is ensured’. In a literal sense, the notion of ‘internal market’ or ‘single market’ would be confined to the achievement of the four fundamental freedoms. In this respect, those notions appeared to be more limited in scope than that of ‘common market’, which also encompassed the common commercial policy and the competition policy. However, this strict interpretation could not reflect the ambitious objectives of the drafters of the SEA. First, Article 13 did not alter the fundamental framework and principles laid down for the purpose of achieving the common market, nor did it replace them. Secondly, Article 13 SEA introduced an innovative element into the concept of ‘common market’, by defining it as an ‘area without internal frontiers’, making it a genuine unified area, with no internal customs and free of all technical, fiscal, physical and monetary barriers. Having said that, former Articles 2 and 3(1)(h) TEC still referred to a ‘common market’, while former Article 3(1)(c) TEC described the internal market as being ‘characterised by the abolition of obstacles to the free movement of goods, persons, services and capital’, and former Article 3(1)(g) TEC provided that the activities of the European Community included a ‘system ensuring that competition in the internal market is not distorted’.

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The 2009 Lisbon Treaty put an end to the dual reference to the common market and internal market. Article 3(3) TEU now identifies the establishment of an internal market as one of the objectives of the Union, and the Treaty on the Functioning of the European Union contains a specific title in Part Three on the ‘Internal Market’. 11.2.2.2

The internal market: a gradual process of creation Former Article 8a TEEC (now repealed) provided: The Community shall adopt measures with the aim of progressively establishing the internal market over a period expiring on 31 December 1992 … In order to ensure that the internal market was established and completed in a balanced way throughout the then European Community, the SEA imposed a few essential conditions on the Community institutions and the Member States for the adoption of their legislative programme. First, Article 14 provided that EC legislative measures had to take into account a ‘balanced progress in all the sectors concerned’, thus clearly emphasising their interdependence in a global economic environment. Secondly, Article 15 SEA (now Article 27 TFEU) provided: When drawing up its proposals … the Commission shall take into account the extent of the effort that certain economies showing differences in development will have to sustain during the period of establishment of the internal market and it may propose appropriate provisions. If these provisions take the form of derogations, they must be of a temporary nature and must cause the least possible disturbance to the functioning of the internal market. This obliged the Commission to take account of the economic differences existing between the Member States, their regions, and between overseas territories and other European economies. Thirdly, according to Article 18(3) SEA, adding new Article 100a EEC (now 114 TFEU): The Commission, in its proposals envisaged in paragraph 1 concerning health, safety, environmental protection and consumer protection, will take as a base a high level of protection. (emphasis added) Furthermore, the achievement of an internal market would not be complete, were it not accompanied and supplemented by new common European policies. New policies were expressly inserted in the Treaty of Rome by the SEA, to give the internal market a new dimension. These were as follows: • Cooperation in economic and monetary policy under former Article 102a TEEC (now economic and monetary policy under Articles 119–144 TFEU), designed to ensure the convergence of economic and monetary policies within the competence of the European Community at that time. This chapter on economic and monetary policy was later fully rewritten under the Maastricht Treaty. • Social policy under former Articles 118a and 118b TEEC (now Articles 151–161 TFEU), regarded as a fundamental part of the 1993 objectives by the Commission in its communication of 14 September 1988 (COM(88) 1148 final). The achievement of the single market would have indeed been absurd if the standard of living and social welfare fought for and enjoyed by European citizens were to be put into question. For that purpose, the SEA supplemented the numerous

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provisions of the EEC Treaty in the social area, either by adding new provisions or by extending the powers of the European Community. Furthermore, an EC Charter of Social Rights was adopted at Strasbourg on 9 December 1989 by 11 Member States (thus excluding the UK), which was later incorporated into the EEC Treaty by the Maastricht Treaty. • Economic and social cohesion under former Articles 130a–130e TEEC (now the economic, social and territorial cohesion policy under Articles 174–178 TFEU), ‘aiming at reducing disparities between various regions within the EC and the backwardness of the least-favoured regions’. • Research and technological development under former Articles 130f–130q TEEC (now research and technological development and space under Articles 179–190 TFEU), aiming at strengthening the scientific and technological dimension of European industry by adopting multi-annual framework programmes (MFP) implemented through specific programmes, such as ESPRIT (information technologies), RACE (telecoms), BRITE (new technologies applied to traditional industries), EURAM (conception and production of new material), and JET (controlled thermonuclear fusion). • Environmental protection, which was formally incorporated by the SEA into the Treaty of Rome under former Articles 130r–130t TEEC (now Articles 191–193 TFEU). Until then, and since 1972, European environmental policy had been based on former Articles 100 TEEC (approximation of national laws) and 235 TEEC (residual powers – see 3.2.3), as the European Community had no original competences in that domain. The SEA was thus instrumental in turning environmental protection into one of the fundamental objectives of the European Community, and in establishing core principles of European environmental law such as the prevention principle or the integration principle. By the end of the eight-year internal programme, 264 of the 282 proposals had been adopted and 18 proposals remained, of which five were not given high priority. This certainly was an unprecedented legislative achievement, and the work on the single market was remarkably successful, in particular with respect to the movement of goods, services and capital. 11.2.2.3

The internal market after the first 10 years The benefits of the internal market were first assessed by the Commission in its Staff Working Paper, ‘The Internal Market – Ten Years without Frontiers’ (Brussels, 7.1.2003 SEC (2002) 1417). Painting a broad-brush picture of the achievements of the SEA, the Commission asserted that [t]he benefits of the measures set out in the White Paper [were] clearly being felt, as more and more individual citizens and businesses [took] advantage of the opportunities on offer. The Internal Market has not of course been the only factor at work: other major forces [were] also transforming our economies – ie rapid and accelerating globalisation and the rise of new technologies, in particular the internet. The relationship between these forces and the Internal Market is complex and mutually reinforcing. Together, they have contributed to opening up the Member States’ economies to more competition and brought immense benefits in terms of increased efficiency and competitiveness. Moreover, the Internal Market has been further developed and strengthened in the last ten years. It has been extended into new sectors, such as air transport,

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telecommunications energy and financial services, which are crucial to the competitiveness of the economy as a whole. Consumer and environmental protections have been significantly enhanced. … And now, with the arrival of the euro, the pace of economic integration has been stepped up and many of the benefits of the Internal Market have been reinforced. (at 4) The following are some of the perceived and estimated economic benefits of the internal market: • EU GDP in 2002 was 1.8% (or €164.5 billion) higher than in 1992 • about 2.5 million jobs were created in the EU after 1992 • there was more created wealth, to the value of €877 billion, between 1992 and 2002 • the ability of EU businesses to compete in global markets was enhanced • there was an increase in EU exports to third countries, from 6.9% of EU GDP in 1992 to 11.2% in 2001 • there was a doubling of the percentage of EU GDP of foreign direct investment into the EU • trade within the borders of the EU was made easier as a result of the elimination of border bureaucracy, shorter delivery times and reduced costs, and the harmonisation of different, complex national standards and requirements • new export markets opened up to small and medium-sized enterprises (SMEs) • cross-border sales of companies exporting to more than five EU countries received a boost • public procurement opened up, enabling companies to bid for contracts to supply goods and services to public authorities in other Member States. Citizens and consumers have also directly benefited from the opening up of national markets and the resulting increased in competition. For instance, they enjoyed: • a wider choice of goods and services at cheaper prices; • lower telecommunications tariffs and lower airfares as a result of technology combined with internal market liberalisation; • work, retirement, or study in another country (it was estimated that more than 15 million EU citizens had moved across borders for one or more of those purposes); • full consumer rights when shopping outside their own country.

11.2.3 The internal market of the 21st century While many barriers have been removed, others have reappeared, and new challenges are arising. Despite many achievements, the internal market is far from being complete 22 years on, and much remains to be done to turn it into a genuinely integrated market. Far from being finite, it is an ongoing process. In its Communication, ‘A Single Market for Citizens – Interim report to the 2007 Spring European Council’ (COM(2007) 60 final, 21 February 2007), the Commission pointed out that the internal market should now ‘evolve to make markets work better and deliver even more tangible benefits for European citizens, entrepreneurs, workers and consumers alike in an enlarged EU’ (at 3). To that effect, on 20 November 2007, the Commission presented an overall plan to realise the potential of the internal market and position it to adapt to new realities of globalisation, the fast pace of innovation, and social and environmental evolution. On 29 June 2009, it also made a Recommendation ‘on measures to improve the functioning of the single market’ (2009/527/EC, [2009] OJ L176/17).

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In 2010, at the request of the Commission, former Commissioner Mario Monti submitted a report entitled A New Strategy for the Single Market, in which he proposed ‘a new strategy to safeguard the single market from the risk of economic nationalism, to extend it into new areas key for Europe’s growth and to build an adequate degree of consensus around it’ (at 7). This strategy was articulated around three broad sets of initiatives aimed at: (a) ‘removing the remaining bottlenecks and plugging the gaps and missing links that hamper innovation and dampen growth potential in the single market’ (at 8). This included ensuring the better functioning of the single market for citizens, consumers and SMEs; creating a digital single market; supporting green growth and Europe’s transition to a low-carbon and resource-efficient economy; maximising the potential of the single market for services; encouraging labour mobility in the single market; and establishing the ‘physical’ infrastructure for the single market; (b) addressing ‘the concerns identified through the consultation and thus building consensus on a stronger single market’ (at 8). These concerns were notably about reconciling economic freedoms and workers’ rights; guaranteeing a place for social services within the single market; the integrating of the EU’s policy goals in public procurement policy; using tax coordination to safeguard national tax sovereignty within further market integration; balancing competitiveness and cohesion within the single market through regional development policies; fostering an active industrial policy; and ensuring that the single market remains open without being powerless vis-à-vis competitors from outside; (c) improving the tools needed to boost the single market, notably through ensuring light but effective regulation in the single market; and reinforcing enforcement of EU rules through a coherent system in which ‘infringement actions, informal problem solving mechanisms and private enforcement form a seamless web of remedies against breaches of EU law’ (at 9). Finally, under the leadership of Michel Barnier, former Commissioner for the Internal Market, the Commission presented an action plan in the form of 50 proposals in a Communication entitled ‘Towards a Single Market Act. For a highly competitive social market economy. 50 proposals for improving our work, business and exchanges with one another’ (COM(2010) 608 final, 27 October 2010). This was supplemented by another Communication of 13 November 2011, entitled ‘Single Market Act. Twelve levers to boost growth and strengthen confidence. “Working together to create new growth”’ (COM(2011) 206 final), and another of 3 October 2012 on ‘Single Market Act II. Together for new growth’ (COM(2012) 573 final). Because the ‘single market integration is not an irreversible process, and the continued existence of the single market should not be taken for granted’ (Report of the European Parliament, On Delivering a Single Market to Consumers and Citizens (A7-0132/2010) at 6), the Single Market Acts aim to achieve a highly competitive social market economy, and are designed to boost the single market through 12 key drivers for growth, competitiveness and social progress, including: • greater workers’ mobility (modernising the rules for mutual recognition of professional qualifications) (see 15.5) • better access to finance for SMEs (common rules for venture capital funds) • improved consumer protection (non-judicial means of redress) • strengthened standardisation for services

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• new EU tax legislation to meet the challenge of sustainable development • reinforced intellectual property (unitary patent protection for inventions) • stronger European transport, energy and electronic communications networks • the modernisation of the public procurement legislative framework • the development of a Digital Single Market. While recognising that ‘the Single Market is one of Europe’s great achievements’, adapting it to the ever-changing and challenging environment (economic and financial crisis, high unemployment, low levels of growth and investment) is an ongoing process (see Commission Communication, ‘Upgrading the Single Market: more opportunities for people and business’ COM(2015) 550 final, 28 October 2015 at 1; see also Communication, ‘The Goods Package: Reinforcing trust in the single market’ (COM(2017) 787 final, 19 December 2017 at 1). More recently, the European Council reiterated the important role that the single market plays in the creation of a strong European economic base. In the Annex to its conclusions of 20 June 2019, entitled A New Strategic Agenda 2019-2024, it notably affirms that: To maximise our impact, we need a more integrated approach connecting all relevant policies and dimensions: deepening and strengthening the Single Market and its four freedoms, designing an industrial policy fit for the future, addressing the digital revolution and ensuring fair and effective taxation. The Single Market in all its dimensions is a key asset in that regard. The EU cannot afford to under-utilise the potential of a market of half a billion people, particularly in the area of services. Short-term difficulties cannot be invoked as an argument against a long-term strategy that is bold, all-encompassing, and forward-looking. (at 8)

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11.3 Harmonisation Alongside instruments of negative harmonisation, whereby barriers to free movement of goods, persons, services and capital are removed, EU institutions can also resort to positive harmonisation to prevent those barriers from reappearing. Harmonisation of national legislation is in this respect a very efficient instrument to achieve the objectives of ‘establishing or ensuring the functioning of the internal market’, as set out in Article 26 TFEU (Article 114(1) TFEU). Harmonisation aims to deal with disparities between the laws of the Member States in areas where they are liable to prevent free movement and subsequently distort competition. Such disparities need not be current. Indeed, in Case C-66/04 United Kingdom v European Parliament and Council of the European Union [2005] ECR I10573, interpreting the concept of harmonisation broadly, the Court of Justice stated that former Article 95 TEC (now Article 114 TFEU) authorised the EU legislature to intervene by adopting appropriate measures [w]here there are obstacles to trade, or it is likely that such obstacles will emerge in the future, because the Member States have taken, or are about to take, divergent measures with respect to a product or a class of products which bring about different levels of protection and thereby prevent the product or products from moving freely within the [EU] … (para 41, emphasis added) Yet the ‘mere finding of disparities between national rules is not sufficient to justify having recourse to Article [114 TFEU]’ (see Case C-434/02 Arnold André GmbH & Co KG v Landrat des Kreises Herford [2004] ECR I-11825, para 30; and Joined Cases C154/04 and C-155/04 R, on the application of Alliance for Natural Health and NutriLink Ltd v Secretary of State for Health and R, on the application of National Association of Health Stores and Health Food Manufacturers Ltd v Secretary of State for Health and National Assembly for Wales [2005] ECR I-6451, para 28). Furthermore, harmonisation under Article 114 TFEU must aim ‘to improve the conditions of the establishment and functioning of the internal market’ (UK v EP and Council of the EU, above, para 44).

11.3.1 The legal basis of harmonisation With the exception of the provisions concerning the Area for Freedom, Security and Justice, notably Article 82 TFEU (Judicial cooperation on criminal matters through measures establishing minimum rules facilitating mutual recognition of judgments and judicial decisions) and Article 83 TFEU (Directives establishing minimum rules regarding the definition of criminal offences and sanctions, particularly for serious crime with a cross-border dimension), and common policies provisions (eg the transport policy under Article 91 TFEU, competition policy under Article 103 TFEU, or the environmental policy under Article 191 TFEU, etc), the main instruments and procedure of harmonisation are spelled out in Chapter 3 of the TFEU on ‘Approximation of Laws’, under Title VII on ‘Common Rules on Competition, Taxation and Approximation of Laws’. The main harmonisation provision is Article 114(1) TFEU, which provides: Save where otherwise provided in the Treaties, the following provisions shall apply for the achievement of the objectives set out in Article 26. The European Parliament and the Council shall, acting in accordance with the ordinary legislative procedure and after consulting the Economic and Social Committee,

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adopt the measures for the approximation of the provisions laid down by law, regulation or administrative action in Member States which have as their object the establishment and functioning of the internal market. Formerly Article 95 TEC, this provision is a direct product of the SEA, and is aimed at the ‘establishment and functioning of the internal market’. It was designed to remedy the shortcomings of its predecessor, Article 100 TEEC, especially as a result of the unanimity rule requirement (see 2.3.2.3), which obstructed progress. However, the drafters of the SEA originally regarded this provision as a derogation from the unanimity requirement laid down in former Article 94 TEC (now Article 115 TFEU) and as subordinate to the latter. Indeed former Article 95 TEC originally started with the words ‘By way of derogation from Article 94’. Yet, because of its flexibility of use owing to the qualified majority rule (see 2.3.2.3), former Article 95 TEC proved to be the main driver for the establishment of the internal market and the vast harmonisation programme, as set out in the 1985 Commission White Paper. Furthermore, the scope of application of former Article 95 was much clearer and more precise than that of former Article 94 TEC. Indeed, while the former covered harmonising measures that ‘have as their object the establishment and functioning of the internal market’, the latter referred to the approximation of such national laws ‘as directly [affecting] the establishment or functioning of the common market’. Article 115 TFEU now provides: Without prejudice to Article 114, the Council shall, acting unanimously in accordance with a special legislative procedure and after consulting the European Parliament and the Economic and Social Committee, issue directives for the approximation of such laws, regulations or administrative provisions of the Member States as directly affect the establishment or functioning of the internal market. It is now more than clear that the process of harmonisation has as its main object and purpose the establishment and functioning internal market, within the framework of Articles 114 and 115 alike. It is also to be noted, though, that, with the exceptions mentioned above, under Article 114(2) TFEU, the scope of application of Article 114 TFEU does not extend to fiscal harmonisation (covered by Article 113 TFEU), to the free movement of persons, or to provisions relating to the rights and interests of employed persons.

11.3.2 Harmonisation, approximation or coordination? As in the original provisions of the Treaty of Rome, notably Articles 99 and 100 TEEC, different and inconsistent terminology is used in the TEU and the TFEU to describe harmonisation. For instance, while Article 113 TFEU refers to ‘harmonisation of legislation’ with regard to taxation, Article 114(1) and Article 115 use the expression ‘approximation of the provisions laid down by law, regulation or administrative action in Member States’. Yet the words ‘harmonisation measure’ are used in Article 114(4), (5), (7) and (10). Furthermore, the reference to coordination of the provisions laid down by law, regulation or administrative action in Member States is also made in other parts of the TFEU, such as in Article 53(1) (right of establishment), Article 145 (‘coordinated strategy for employment’), Article 150, first paragraph (‘coordination between Member States on employment and labour market policies’), Article 156, first paragraph (‘coordination of [the Member States’] action in all social policy fields’) and

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Article 173(2) (coordinated action in industry policy to the exclusion of ‘any harmonisation of the laws and regulations of the Member States’ under Article 173(3)). Even Article 32 TEU provides that ‘Member States shall ensure, through the convergence of their actions, that the Union is able to assert its interests and values on the international scene’ (emphasis added), for the purpose of determining a common action on any matter of Common Foreign and Security Policy. It might be suggested that the difference in the terminology used reflects a difference in degree in the process of harmonisation, with ‘coordination’ being the lowest form of harmonisation, and ‘approximation’ and ‘harmonisation’ being the more elaborate forms. Coordination could even be presented as the opposite of, or as an alternative to, harmonisation, as seems to be the case under Article 173(2) and (3) TFEU. Yet there is nothing in the Treaties to suggest that this is the case or that each of the terms used has a fundamentally different meaning.

11.3.3 Methods of harmonisation Former Article 100 TEEC was silent about the methods of harmonisation, and the whole process, notably because of the unanimity rule (see 2.3.2.3), originally seemed to have been cumbersome. It certainly proved to be a slow process, and was the main cause of the paralysis of the common market. In order to accelerate the harmonisation process, the Commission proposed a new approach in its 1985 White Paper, based on less and lighter regulation. As it put it then, [t]he general thrust of the Commission’s approach in this area [goods and services] will be to move away from the concept of harmonisation towards that of mutual recognition and equivalence. But there is a continuing role for the approximation of Member States’ law and regulations, as laid down in Article 100 of the Treaty. Clearly, action under this Article would be quicker and more effective if the Council were to agree not to allow the unanimity requirement to obstruct progress where it could otherwise be made. (at 6 and 7) 11.3.3.1

Original methods of harmonisation Before the White Paper and the SEA, four main methods of harmonisation were primarily used at the full discretion (see Case C-66/04 United Kingdom v European Parliament and Council, paras 45–46) of the European legislative bodies: (a) exhaustive harmonisation; (b) partial harmonisation; (c) optional harmonisation; and (d) mutual recognition. Harmonisation is said to be exhaustive or total when a European Directive imposes a single standard throughout the EU that replaces the national standards, even though it allows Member States to adopt stricter standards or provides for strictly controlled derogations (see Case C-374/05 Gintec International ImportExport GmbH v Verband Sozialer Wettbewerb eV [2007] ECR I-9517, regarding complete harmonisation under Directives 2001/83/EC on the Community code relating to medicinal products for human use ([2001] OJ L311/67) and 92/28/EEC on the advertising of medicinal products for human use ([1992] OJ L113/13)). Under such harmonisation measures, Member States may generally no longer justify their own standards under Article 36 TFEU or on the basis of mandatory requirements (see Chapter 14). At times, a regulation might be regarded as the most appropriate legal instrument by imposing

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clear and detailed rules so as to avoid diverging transposition by Member States, thus ensuring that legal requirements are implemented at the same time throughout the Union (eg, Regulation 1223/2009/EC on cosmetic products (recast) ([2009] OJ L342/ 59) which replaced Council Directive 76/768/EEC on the approximation of the laws of the Member States relating to cosmetic products and its later amendments). Harmonisation will be partial when a directive covers only some of the national standards, leaving others untouched. Directive 2000/13/EC on the approximation of the laws of the Member States relating to the labelling, presentation and advertising of foodstuffs ([2000] OJ L109/29) provides an example of full (labelling) and partial (advertising) harmonisation (as illustrated in Case C-239/02 Douwe Egberts NV v Westrom Pharma NV and Souranis [2004] ECR I-7007, para 34 and Case C-315/05 Lidl Italia Srl v Comune di Arcole (VR) [2006] ECR I-11181). A more recent example of partial harmonisation is Directive 2014/40/EU on the approximation of the laws, regulations and administrative provisions of the Member States concerning the manufacture, presentation and sale of tobacco and related products and repealing Directive 2001/37/EC ([2014] OJ L127/1) (see Case C-547/14 Philip Morris Brands SARL and Others v Secretary of State for Health EU:C:2016:325, paras 66–84 and Case C-358/14 Poland v European Parliament and Council EU:C:2016:325). Under optional harmonisation, the application of common standards set under a directive is optional, and Member States remain free to set their own production and marketing rules for goods intended purely for their national markets. This means that manufacturers need comply with European standards only where they intend to trade across the EU, but can choose to follow or not the Directive in its entirety if they trade only at national level. Mutual recognition is the lowest form of harmonisation and, with the exception of Article 53 TFEU on mutual recognition of professional qualifications, is not expressly mentioned in the Treaties. Indeed, mutual recognition is an implied form of harmonisation in trade between the Member States, as the marketing of imported products or services is allowed on the basis that they implicitly comply with the national standards of the importing country. It naturally facilitates market access. Originally taken into consideration by EEC institutions in the early 1970s, in an attempt to avoid dual imposition of technical and administrative controls on goods both in the country of origin and in the country of export, the principle of mutual recognition was formally elaborated and laid down in the Cassis de Dijon case (Case 120/78 Rewe-Zentral AG v Bundesmonopolverwaltung für Branntwein [1979] ECR 649) (see 13.2.3.2). In relation to a German ban on the marketing of alcoholic beverages not meeting a minimum alcoholic content rule, the Court held that ‘[t]here is … no reason why, provided that they have been lawfully produced and marketed in one of the Member States, alcoholic beverages should not be introduced into any other Member State’ (para 14). This basic principle was further codified by the Commission in its Communication concerning the consequences of the judgment given by the Court of Justice on 20 February 1979 in Case 120/78 (‘Cassis de Dijon’) ([1980] OJ C-256/2). In the absence of harmonisation, the principle of mutual recognition simply means that a Member State may not in principle prohibit the sale in its territory of a product lawfully produced and marketed in another Member State even if the product is produced according to technical or quality requirements which differ from those imposed on its domestic products. Where a product ‘suitably and satisfactorily’

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fulfils the legitimate objective of a Member State’s own rules (public safety, protection of the consumer or the environment, etc), the importing country cannot justify prohibiting its sale in its territory by claiming that the way it fulfils the objective is different from that imposed on domestic products. Restrictions on marketing can only be justified on the grounds set out under Article 36 TFEU (see 14.2.1), or on the basis of imperative requirements, provided they are proportionate to the objective pursued (see 14.3). Although this principle should be regarded as a fairly simple one to apply, the Commission observed in recitals 4 and 5 of the preamble to Regulation 764/2008/EC laying down procedures relating to the application of certain national technical rules to products lawfully marketed in another Member State and repealing Decision No 3052/ 95/EC ([2008] OJ L218/21) (the Mutual Recognition Regulation or ‘MRR’) that [m]any problems still exist as regards the correct application of the principle of mutual recognition by the Member States. It is therefore necessary to establish procedures to minimise the possibility of technical rules creating unlawful obstacles to the free movement of goods between Member States. The absence of such procedures in the Member States creates additional obstacles to the free movement of goods, since it discourages enterprises from selling their products, lawfully marketed in another Member State, on the territory of the Member State applying technical rules. Surveys have shown that many enterprises, in particular small and medium-sized enterprises (SMEs), either adapt their products in order to comply with the technical rules of Member States, or refrain from marketing them in those Member States … and that [c]ompetent authorities also lack appropriate procedures for the application of their technical rules to specific products lawfully marketed in another Member State. The lack of such procedures compromises their ability to assess the conformity of products in accordance with the Treaty. Effective as from 13 May 2009, the Mutual Recognition Regulation was adopted on 9 July 2008, with the view to setting rules and procedures to be followed by national authorities when taking administrative measures based on technical rules that are likely to hinder the free movement of a product lawfully marketed in another Member State and not covered by harmonised standards at European level. The Regulation sets out a framework for the assessment of product conformity with national technical standards. National authorities must comply with the rules and procedures regarding: (a) the collating of information on the product concerned; (b) the recognition of certificates or test reports issued by recognised conformity assessment bodies in accordance with Regulation No 765/2008/EC setting out the requirements for accreditation and market surveillance relating to the marketing of products and repealing Regulation (EEC) No 339/93 ([2008] OJ L218/30); (c) the assessment of the need to apply a technical rule, notably its proportionality based on its technical or scientific elements; and (d) the temporary suspension of the marketing of a product, which is prohibited unless the product concerned poses a serious risk, or is prohibited in a Member State on grounds of public morality or public security. Furthermore, the Regulation provides that a Product Contact Point is to be set up by each Member State in order to provide information on the technical rules applicable in

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the territory of the Member State, the contact details of the competent authorities and the remedies available. The MRR applies in all EU Member States, and in those EFTA States that are parties to the Agreement on the EEA (Iceland, Lichtenstein and Norway). It does not, however, apply to EU–Turkey relations, even though the mutual recognition principle does (see Articles 5–7 of Decision 1/95 of the EC–Turkey Association Council of 22 December 1995 on implementing the final phase of the Customs Union ([1996] OJ L35), on the elimination of measures having an effect equivalent to quantitative restrictions between the EU and Turkey). In its Working Document on ‘The concept of “lawfully marketed” in the Mutual Recognition Regulation (EC) No 764/2008’ (COM(2013) 592 final, 16 August 2013), noting that the concept ‘lawfully marketed’ is not defined in the MMR or in the case law of the Court of Justice, the Commission has offered the following definition of the concept ‘lawful marketing’ (at 5 and 6), as meaning the supply taking place in: (a) another Member State, in accordance with the applicable national legislation; or (b) an EFTA state that is a contracting party to the EEA Agreement in accordance with the applicable national legislation. Additionally, with regard to products intended for (or which may be used by) consumers, products placed on the EU market are subject to the requirements and safety criteria laid down by the Directive on general product safety. As regards products imported from third countries, they must lawfully be marketed in a Member State or in an EFTA State that is a contracting party to the EEA Agreement in order to benefit from mutual recognition. The importance of the principle of mutual recognition was particularly stressed by the Competitiveness Council of the EU. In its Conclusions on the Single Market Policy of 2 and 3 December 2013, the Council noted that in order to improve framework conditions for businesses and consumers in the Single Market, all relevant instruments should be used including harmonisation as well as mutual recognition, as appropriate. (para 8) It also stressed ‘the importance of the principle of mutual recognition and its evident benefits already brought to several important areas such as the free movement of goods and the mutual recognition of professional qualifications’ and invited the Commission ‘to identify sectors and markets where the application of the principle of mutual recognition is economically most advantageous but is insufficient or problematic …’ (para 8). As noted by the Council Presidency, the principle of mutual recognition ‘is not used to its full potential and the latest estimates show different shortcomings in its application’ (Preparation for the Council meeting ‘Competitiveness’ on 2 and 3 March 2015 EU Single Market policy – Policy debate; 19 February 2015 at 5). In its conclusions of 2–3 March 2015, the Competitive Council invited the Commission to propose, where appropriate, and the co-legislators to adopt further targeted full harmonization legislation, and to effectively apply, where appropriate, mutual recognition in legislative acts not subject to full harmonization, inter alia by including Internal Market and/or mutual recognition clauses, where relevant, in the EU legislation,

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and ‘to quickly bring forward proposals to address these shortcomings and/or to extend use of the principle’ (Draft Council Conclusions on Single Market Policy as adopted in March 2015 at 3 and 5). This resulted in the adoption on 19 March 2019 of Regulation (EU) 2019/515 on the mutual recognition of goods lawfully marketed in another Member State and repealing Regulation (EC) No 764/2008 ([2019] OJ L91/1) (the Mutual Recognition Regulation 2 or ‘MRR 2’). Effective as from 19 April 2020, it is designed to remedy the several shortcomings of the 2008 Regulation, to establish clear procedures to ensure the free movement of goods lawfully marketed in another Member State and to ensure that free movement can be restricted only where Member States have legitimate public interest grounds for doing so and that the restriction is justified and proportionate … and to ensure that existing rights and obligations deriving from the principle of mutual recognition are observed, by both economic operators and national authorities. (Recital (8) of the Preamble) Under Article 1, the MRR 2 aims to strengthen the functioning of the internal market by improving the application of the principle of mutual recognition and by removing unjustified barriers to trade. For that purpose, it sets out rules and procedures for the application by Member States of the principle of mutual recognition in individual cases in relation to goods which are lawfully marketed in another Member State and provides for the establishment and maintenance of Product Contact Points in Member States and for cooperation and exchange of information in relation to this principle. The key elements of the MRR 2 are: (a) a voluntary ‘mutual recognition declaration’ whereby a manufacturer of goods can demonstrate that their products are lawfully marketed in another Member State (Article 5); (b) a problem-solving procedure designed to help economic operators when mutual recognition is denied and based on SOLVIT, a free-of-charge online service provided by a national authority in each Member State (Article 8); (c) more information on the principle of mutual recognition to economic operators and manufacturers through: (i) National Product Contact Points; and (ii) the Single Digital Gateway set up under Regulation (EU) 2018/1724 of the European Parliament and of the Council of 2 October 2018 establishing a single digital gateway to provide access to information, to procedures and to assistance and problem-solving services and amending Regulation (EU) No 1024/2012 ([2018] OJ L295/1) and designed to facilitate by the end of 2020 online access to the information, administrative procedures and assistance services to help individuals and companies moving across EU borders to get active in another Member State and, by the end of 2023, enable them to perform a number of procedures in all Member States without any physical paperwork such as, for instance, registering a car or claiming pension benefits (Article 9); and (d) a stronger administrative cooperation to improve the application of the mutual recognition principle (Article 10).

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This legislative arsenal shows the importance of the role that the principle of mutual recognition plays in non-harmonised sectors. However, as the Commission pointed out in the conclusions in its First Report on the application of Regulation (EC) No 764/ 2008 of 15 June 2012 (COM(2012) 292 final), it must be highlighted that mutual recognition in general and the application of the Regulation in particular, cannot always offer a solution for ensuring the free movement of goods in the single market. Harmonisation remains one of the most effective instruments, both for economic operators and for the national administrations. (at 13) (See also Commission Notice — The ‘Blue Guide’ on the implementation of EU products rules 2016 ([2016] OJ C272/1) at 7.) It is to be noted that the principle of mutual recognition also extends beyond the European single market to trade between the EU and third countries, namely Australia, Canada, Japan, New Zealand, the USA, Israel and Switzerland, through Mutual Recognition Agreements (MRAs). MRAs are bilateral agreements designed to promote trade in goods between the European Union and third countries and facilitate market access, with the view to benefiting economic operators by providing easier access to conformity assessment. Conformity assessment is the process whereby the conformity of a product is assessed before it is placed on the market of the third country or of the EU by demonstrating, through testing, inspection and certification, that all legislative requirements are met. MRAs specify the conditions under which a third country will accept conformity assessment results (eg testing or certification) performed by the EU’s designated conformity assessment bodies (CABs) to show compliance with the third country’s requirements and vice versa. Lists of designated laboratories, inspection bodies and conformity assessment bodies in both the EU and the third country are included in the MRAs. The text of the Protocol on the mutual acceptance of the results of conformity assessment between the EU and Canada is part of the Comprehensive Economic and Trade Agreement (CETA) ([2017] OJ L11/23, at 567–77). 11.3.3.2

The new approach and the global approach The creation of a single market by 31 December 1992 could not have been achieved without a new regulatory technique and strategy laid down in the Council Resolution of 7 May 1985 on the new approach to technical harmonisation and standards ([1985] OJ C136/1). The principles of the new approach laid the foundation for European standardisation in support of Union harmonisation legislation and is based on the following principles: • Harmonisation is limited to essential requirements set out in annexes to directives, and to be satisfied by products before being placed on and put into service in the European market. • The technical specifications of products meeting the essential requirements set out in the directives are laid down in harmonised standards. • The application of harmonised or other standards remains voluntary, and manufacturers have the option to apply other technical specifications to meet the requirements.

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Products that comply with national standards transposing harmonised standards are presumed to conform with the corresponding essential requirements. Essential requirements are mandatory and lay down the elements necessary to protect the public interest. They are designed to ensure a high level of protection in particular with regard to the protection of the health and safety of users, consumers and workers. They may relate to certain hazards associated with the product, such as physical and mechanical resistance, flammability, chemical, electrical or biological properties, hygiene, radioactivity, accuracy; or to the product’s characteristics or its performance, such as materials, design, construction, manufacturing process, instructions drawn up by the manufacturer. It is for the manufacturer to carry out risk analysis in order to determine the essential requirement applicable to the particular product. The purpose of essential requirements is only to define the objectives to be achieved or the hazards to be dealt with, not to specify the technical solutions for doing so. This allows manufacturers to choose the way they wish to adopt to satisfy the requirements. However, as the Commission points out in The ‘Blue Guide’ on the implementation of EU products rules 2016 ([2016] OJ C272/1)), [t]he negotiation of the first Union harmonisation texts under the New Approach immediately highlighted the fact that the determination of essential requirements and the development of harmonised standards were not sufficient to create the necessary level of trust between Member States and that an appropriate horizontal conformity assessment policy and instruments had to be developed. (at 8) This prompted the Council to adopt its Resolution of 21 December 1989 on a global approach to conformity assessment ([1990] OJ C10/1) and Decision 90/683/EEC (updated and replaced by Council Decision 93/465/EEC of 22 July 1993 concerning the modules for the various phases of the conformity assessment procedures and the rules for the affixing and use of the CE conformity marking, which are intended to be used in the technical harmonisation directives ([1993] OJ L220/23)). These were then repealed and updated by Decision No 768/2008/EC of 9 July 2008 on a common framework for the marketing of products ([2008] OJ L218/82). The main objective of these policy and normative instruments was to develop common tools for conformity assessment across the board for both regulated and nonregulated areas. Under Article 2(1) of Regulation (EU) 1025/2012 of the European Parliament and of the Council of 25 October 2012 on European standardisation, amending Council Directives 89/686/EEC and 93/15/EEC and Directives 94/9/EC, 94/25/EC, 95/16/EC, 97/23/EC, 98/34/EC, 2004/22/EC, 2007/23/EC, 2009/23/EC and 2009/105/EC of the European Parliament and of the Council and repealing Council Decision 87/95/EEC and Decision No 1673/2006/EC of the European Parliament and of the Council ([2012] OJ L316/12), ‘standards’ are defined as a technical specification, adopted by a recognised standardisation body, for repeated or continuous application, with which compliance is not compulsory … These standards can be: • ‘national standards’, ie adopted by a national standardisation body; • ‘international standards’, ie adopted by an international standardisation body; • ‘European standards’, ie adopted by a European standardisation organisation; or • ‘harmonised standards’, ie adopted on the basis of a request made by the Commission for the application of Union harmonisation legislation.

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Harmonised standards are European standards, defined as technical specifications (a document that prescribes technical requirements to be fulfilled by a product, process, service or system and which lays down product or service characteristics, production methods or processes, or methods and the criteria for assessing the performance of construction products) elaborated and adopted by European standards organisations (ESOs), namely the European Committee for Standardisation (CEN), the European Committee for Electrotechnical Standardisation (CENELEC) and the European Telecommunication Standards Institute (ETSI). Rules on the cooperation between European standardisation organisations, national standardisation bodies, Member States and the Commission are established by Regulation (EU) 1025/2012. Article 1 of the Regulation further makes provision for … the establishment of European standards and European standardisation deliverables for products and for services in support of Union legislation and policies, the identification of [information and communication technologies] technical specifications eligible for referencing, the financing of European standardisation and stakeholder participation in European standardisation. This Regulation therefore aims to strengthen the institutional framework for standardisation and its use by the Commission. Rules on cooperation between European standards bodies and European organisations are also covered by the 2003 General Guidelines for the Cooperation between CEN, CENELEC and ETSI, the European Commission and EFTA ([2003] OJ C91/04). The internal rules of these organisations provide that European standards must be transposed at national level. Harmonised standards must match the essential requirements of the relevant directives. New approach directives are total harmonisation directives (see 11.3.3.1). As a result, Member States are, in principle, not allowed to maintain or introduce more stringent rules than those provided for in the particular directive. Examples of such directives are: • the General Product Safety Directive (GPSD) (Directive 2001/95/EC ([2001] OJ L 11/4)) • the Toy Safety Directives (Directives 88/378/EEC and 2009/48/EC ([2009] OJ L170)) • the Active Implantable Medical Devices Directive (Council Directive 90/385/EEC ([1990] OJ L 189/31)) • the Medical Devices Directive (Council Directive 93/42/EEC ([1993] OJ L 169/1)) • the Packaging and Packaging Waste Directive (Directive 2005/20/EC amending Directive 94/62/EC on packaging and packaging waste ([2005] OJ L70)) • the Low Voltage Directive (Directive 2006/95/EC ([2006] OJ L374)) • the Machinery Directive (2006/42/EC ([2006] OJ L157)).

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SAFETY Products marketed in the EU must meet high safety and environment protection requirements

MARKET SURVEILLANCE Designed to check that non-food products on the EU market do not endanger consumers and workers, and protect notably the environment, security and trade fairness

INFORMATION AND COMMUNICATION SYSTEM ON MARKET SURVEILLANCE (ICSMS) IT platform to facilitate communication between market surveillance bodies

STANDARDISATION Ensures performance, safety, and the interoperability of products

NOTIFIED BODIES National organisations carrying out a conformity assessment procedure

CE MARKING Products marketed in the EU which have been assessed to meet all product requirements can bear the CE marking

CONFORMITY ASSESSMENT PROCEDURE Carried out before the product can be placed on the EU market

ACCREDITATION Ensures that an assessment body has the technical capacity to perform its duties

EXTERNAL BORDERS Products coming from third countries into the importing Member State

Figure 11.2 Key elements of the single market (based on Single market and standards, Building blocks of the

single market, available at )

in practice Consumers are very familiar with the CE mark, which can be found on most common goods such as smart phones, laptops, tablets and toys, but very few know exactly what it means. The CE mark is simply an indication that a product is compliant with EU legislative requirements (eg, a harmonised level of health or safety laid down in applicable directives), so as to enable its free movement within the European Economic Area (EEA). It is the sole responsibility of the manufacturers to declare that their products, whether manufactured within or outside the EEA, meet all the legal requirements for the CE mark. Affixing the mark to their products means that those products can be sold throughout the EEA. The CE mark is therefore an indication not of origin but that the product has been assessed before being marketed within the EEA. It is the manufacturers’ responsibility to: • • •

verify that their products comply with all relevant essential requirements laid down in the applicable directive; ensure that the products have been examined by an independent conformity assessment body, if so required by the applicable directive; and carry out all conformity assessment, create the technical file, issue the declaration of conformity and affix the CE mark to the product.

For their part, distributors must check that the CE mark has been appropriately affixed to the product and that the supporting documentation is correct. Importers of products manufactured outside the EEA must check that all the necessary steps for declaration of conformity have been taken by the manufacturer and that the relevant documentation is readily available.

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11.4 Further reading Chalmers D, ‘Repackaging the Internal Market’ (1994) 19 EL Rev 385. Curral J, ‘Some Aspects of the Relation between Articles 30–36 & Article 100 of the EEC Treaty, with a Closer Look at Optional Harmonisation’ (1984) 4 Yearbook of European Law 169. Dougan M, ‘Minimum Harmonization & the Internal Market’ (2000) 37 CML Rev 853. Ehlermann CD, ‘The Internal Market Following the Single European Act’ (1987) 24 CML Rev 361. Gormley WL, ‘Competition and Free Movement: Is the Internal Market the Same as a Common Market?’ (2002) European Business Law Review 517. Govaere I, ‘The Future Direction of the EU Internal Market: On Vested Values and Fashionable Modernism’ (2009) 16 Columbia Journal of European Law 67. Hervey TK, ‘Community & National Competence in Health after Tobacco Advertising’ (2001) 38 CML Rev 1421. Oliver P and Roth WR, ‘The Internal Market and the Four Freedoms’ (2004) 41 CML Rev 407. Mortelmans K, ‘The Common Market, the Internal Market, and the Single Market, What’s in a Market?’ (1998) 35 CML Rev 101. Mostl M, ‘Preconditions and Limits of Mutual Recognition’ (2010) 47 CML Rev 405. Pelkmans J, ‘The New Approach to Technical Harmonisation and Standardisation’ (1987) 25 Journal of Common Market Studies 249. Rott P, ‘Minimum Harmonization for the Completion of the Internal Market?’ (2003) 40 CML Rev 1107. Slot PJ, ‘Harmonisation’ (1996) 21 EL Rev 378. Smith MP, ‘Single Market, Global Competition’ (2010) 17 Journal of European Public Policy 936. Volpato A, ‘The Harmonized Standards before the ECJ: James Elliott Construction’ (2017) 54 CML Rev 591. Summary

ry ma sum

The internal market is the cornerstone of the whole EU law project. Defined as an ‘area without frontiers within which the free movement of goods, persons, services and capital is ensured’, the internal market was completed under the Single European Act on 1 January 1993 thanks to an ambitious programme of removal of remaining barriers to the free movement of persons and of material resources, and of harmonisation of national laws with a view to reducing disparities between national rules, a process improved and accelerated under a new approach introduced by the European Commission in 1985. Yet, despite the many achievements in 1993 and the clear benefits of the creation of the internal market in the 10 years that followed, much remains to be done to ensure that the internal market meets the challenges arising from globalisation, technological innovation, and social and environmental evolution. To that end, in 2011 and 2012 the European Commission put forward, in two Communications on the Single Market Act, a number of proposals to achieve a highly competitive social market economy and to boost the internal market through 12 key drivers for growth, competitiveness and social progress.

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These were further supplemented by two Communications of 2015 and 2017 on adapting the single market to the current challenges. The importance of the role that the single market plays in the creation of a strong European economic base was also stressed by the European Council’s conclusions of June 2019.

ur t yo e tes wledg kno

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To what extent can one say that the Single European Act achieved the Single European Market? To what extent is it true to say that ‘Mutual recognition is not always a miracle solution for ensuring free movement … in the single market. Harmonisation or further harmonisation remains without doubt one of the most effective instruments, both for economic operators and for the national administration’? (Commission, Second Biennal Report on the Application of the Principle of Mutual Recognition in the Single Market (COM(2002) 419 final, 23 July 2002, para 3) To what extent can we say that the 2019 Regulation on mutual recognition has remedied the shortcomings of the 2008 Regulation?

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The Free Movement of Goods: The Customs Union and the Abolition of Tariff Barriers

After reading this chapter, you will be able to understand: • • • •

the aim of the free movement of goods provisions the concept of the Customs Union, and its internal and external dimensions the definition of a charge having equivalent effect to customs duties the definition of discriminatory internal taxations

12.1 Introduction The free movement of goods is one of the fundamental principles of the Treaty (Case C-265/95 Commission v France (Re Spanish Strawberries) [1997] ECR I-6959, para 24; Case C-320/03 Commission v Austria [2005] ECR I-9871, para 63) and one of the fundamental freedoms in EU law (Case C-108/09 Ker-Optika bt v ÀNTSZ Déldunántúli Regionális Intézete [2010] ECR I-12213, para 43). In fact, given the wording of Article 26(2) TFEU, which defines the internal market, the principle of free movement of goods holds first place amongst the four fundamental freedoms: 2. 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 the Treaties. Indeed, with the exception of Article III-130(2) of the unratified Treaty Establishing a Constitution for Europe of 29 October 2004, which put individuals at the heart of European integration, the free movement of goods has always been listed as the first fundamental freedom, and the Treaty of Lisbon has preserved that order. This is in no way surprising, as Member States have always given priority to the free movement of goods and the liberalisation of markets, over the free movement of persons. This principle ensures that national businesses have open and free access to the ability to export domestic products to all other Member States, without restrictions; indeed, this is one of the principal reasons for joining the EU. Free movement of goods across the EU is seen as increasing economic efficiency by increasing competitive pressure, driving up quality and driving down prices, widening consumer choice and developing the EU’s competitiveness in world markets. The free movement of goods can operate either within a free trade area, within which Member States retain a wide discretion, or within a Customs Union, which favours a high level of economic integration and limits Member States’ discretion. In the aftermath of the Second World War, while the majority of European States, under the leadership of the UK, created the European Free Trade Area (EFTA), the six original EEC Member States opted for a Customs Union (see 1.5). The Customs Union is the foundation of the EU, and is the core element in the existence and functioning of the internal market (see 1.5).

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12.2 The Customs Union 12.2.1 The creation of the Customs Union The Customs Union was solidly established on three pillars: • A standstill clause. Former Article 12 TEEC prevented Member States from introducing new customs duties on imports and exports, or any charges having equivalent effect, or increasing those already applied in their trade with each other (Case 26/62 NV Algemene Transport- en Expeditie Onderneming van Gend & Loos v Netherlands Inland Revenue Administration [1963] ECR 1). • A timetabled removal of all customs duties and quantitative restrictions over a transitional period of 12 years (Article 14 TEEC). Under Article 14 TEEC, this transitional period was divided up into three stages of four years each. Customs duties were to be reduced by 30% in the first two stages and by 40% in the remaining period. Owing to a favourable economic climate, this process was accelerated, and Member States agreed on 12 May 1960 and 15 May 1962 to reduce those duties by 30% as of 1 July 1960 and by 50% as of 1 July 1962. By 1 January 1966, the basic duties were reduced by 80% (against 60% as scheduled), and duties on industrial products were abolished on 1 July 1968, 18 months before the end of the transitional period. Industrial products EEC Treaty

first stage

level Acceleration process

1 Jan 1959 1 July 1960

(as a percentage of the basic duties at 1 January 1957) 10% 10% 10%

90% 80% 70%

1 July 1963 1 Jan 1965

10% 10% 10% 10%

60% 50% 40% 40%

1 Jan 1966 1 July 1967 1 July 1968

10% 5% 15%

20% 15% 0%

1 Jan 1961 1 Jan 1959 second stage

third stage

duties remaining

1 July 1962

Table 12.1 Timetable for the abolition of customs duties under former Article 14 TEEC

•

A Common Customs Tariff. Regulation 950/68/EEC ([1968] OJ L172/1) gradually established a Common Customs Tariff (CCT), by approximating the then four customs tariffs of Benelux, France, Germany and Italy. Member States were to apply this CCT from 1 July 1968 to goods imported from third countries, and eliminate any customs duties chargeable between them on those goods. This CCT simply consists of a list of categories of goods, updated each year, setting out the duty payable on the products coming from a non-Member State into the EU; the duty is normally an ad valorem duty (based on the value of the products) and, although collected by Member States’ authorities, is one of the EU’s own resources.

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12.2.2 The Union Customs Code A Community Customs Code was established under Council Regulation 2913/92/EEC, which consolidated and codified all rules and procedures applicable to goods originating from third countries. This Customs Code was later modernised under Regulation 450/2008/EC of the European Parliament and of the Council of 23 April 2008 laying down the Community Customs Code (Modernised Customs Code) (in order to incorporate new, simplified customs procedures and methods, rationalise international trade and reduce costs for businesses). This was repealed by Regulation 952/2013/EU of the European Parliament and the Council of 9 October 2013, which establishes a Union Customs Code that will provide, as from 1 May 2016, the new EU legislative framework on customs rules and procedures. The purposes of the Code are to rationalise and simplify customs legislation, rules and procedures, provide legal certainty and uniformity to economic operators and greater clarity for EU customs officials, and to offer compliant economic operators a swifter customs procedure through a complete paperless electronic process. This Code may be regarded as the ultimate instrument of Customs integration.

12.2.3 The internal and external aspects of the Customs Union Under Article 28(1) TFEU: 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. It is clear from this provision that the Customs Union has an internal and an external dimension. Internally, the Member States are required to abolish all tariff barriers (customs duties (see below 12.4.1) and charges having equivalent effect (see below 12.4.2)) with a view to establishing a single customs area. Externally, the Member States must apply the same duties on goods entering the EU, a common customs tariff, which in turn has become an important instrument of the European Common Commercial Policy. Conducted ‘in the context of principles and objectives of the Union’s external action’ (Article 207(1) TFEU), this policy is a Union instrument to support ‘the harmonious development of world trade, the progressive abolition of restrictions on international trade and on foreign direct investment, and the lowering of customs and other barriers’ (Article 206 TFEU). The Customs Union Internal Aspects

External Aspects

Abolition of tariff barriers (Art 30 TFEU)

Common Customs Tariff (CCT) (Arts 31 and 32 TFEU (ex Arts 26 and 27 TEC)) Applies to goods imported into the EU (Art 29 TFEU) European Common Commercial Policy (CCP) (Art 207(1) TFEU)

Table 12.2 Aspects of the Customs Union

Article 29 TFEU further provides:

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Products coming from a third country shall be considered to be in free circulation in a Member State if the import formalities have been complied with and any customs duties or charges having equivalent effect which are payable have been levied in that Member State, and if they have not benefited from a total or partial drawback of such duties or charges. The Customs Union therefore has a wider dimension than a free trade area, which only involves the removal of customs duties and quotas on goods circulating within the area, and within which the participating States’ powers to regulate their trading relations and policies with third countries remain untouched.

12.3 The definition of ‘goods’ While the TFEU prohibits all barriers to the trade of goods, Article 28 TFEU offers no definition of the terms ‘goods’ or ‘products’. In contrast, ‘agricultural products’ are clearly defined under Article 38(1) TFEU. The lacunae in the Treaty gave the ECJ the opportunity to define the term ‘goods’ in the widest sense. In Case 7/68 Commission v Italy (Re Art Treasures) [1968] ECR 423, the Court rejected the argument raised by the Italian Government, according to which the provisions on free movement of goods would not apply to a charge levied on the export of goods of historic or artistic interest. The Court ruled that such goods can be ‘valued in money and … are capable, as such, of forming the subject of commercial transactions’ (at 428). As a result, the nature of the good, its commercial value or its final use being irrelevant, the concept has been applied to goods as varied as collectable coins (Case 7/78 R v Thompson, Johnson and Woodiwiss [1978] ECR 2247), recyclable and non-recyclable waste (Case C-2/90 Commission v Belgium (Re Walloon Waste) [1992] ECR I-4431, para 28; Case C-221/06 Stadtgemeinde Frohnleiten and Gemeindebetriebe Frohnleiten GmbH v Bundesminister für Land- und Forstwirtschaft, Umwelt und Wasserwirtschaft [2007] ECR I-9643, para 37), wild and domesticated animals (Case 100/08 Commission v Belgium (Re Birds Born and Bred in Captivity) [2009] ECR I-140; Case C-219/07 Nationale Raad van Dierenkwekers en Liefhebbers VZW and Andibel VZW v Belgium [2008] ECR I-4475), human blood products (Case C-421/09 Humanplasma GmbH v Austria [2010] ECR I-12869), slot machines (Case C-124/97 Läärä, Cotswold Microsystems Ltd and Oy Transatlantic Software Ltd v Kihlakunnansyyttäjä (Jyväskylä) and Suomen valtio (Finnish State) [1999] ECR I-6067) and even electricity (Case 393/92 Municipality of Almelo v Energibedriff Ijsselmij [1994] ECR I-1477 and Case C-573/12 Ålands vindkraft AB v Energimyndigheten EU:C:2014:2037). In contrast, lottery advertisements and tickets (Case C-275/92, Her Majesty’s Customs and Excise v Schindler and Schindler [1994] ECR I-1039) and fishing rights and angling permits (Case C-97/98 Jägerskiöld v Gustafsson [1999] ECR I-7319) do not constitute goods, and are covered by the provisions on freedom to provide services; while the cross-border movement of banknotes and coins that are still legal tender is covered by the provisions on free movement of capital (Joined Cases C-358/93 and C-416/93 Criminal proceedings against Bordessa, Marí Mellado and Barbero Maestre [1995] ECR I-361).

12.4 The elimination of tariff barriers As Article 28 TFEU provides, the Customs Union ‘… shall involve the prohibition between Member States of customs duties on imports and exports and of all charges

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having equivalent effect …’. The latter charges, in particular, constitute surreptitious but efficient national protectionist measures, which for decades slowed down the completion of a genuine European internal market. Equally, Member States used their fiscal policies, control of which they retain and fiercely protect, in a way that offered protection to their domestic products against imported goods similar to, or in competition with, those domestic products (discriminatory internal taxation). Both charges having equivalent effect and discriminatory internal taxation are protectionist pecuniary measures that hinder the free movement of goods and free and fair competition within the single market. It is always tempting for governments and national authorities to try to protect their own domestic economies by making it more difficult for imported products to enter their national markets and compete against domestic products, or to make the imported goods more expensive so that domestic consumers are more likely to buy domestic goods. It is only necessary to read the 1985 Commission White Paper (‘Completing the Internal Market’ (COM(85) 310 final)), which made a negative assessment of the then common market, to understand how its completion as a true single market and the objective of the EC Treaties, to create a European economic system and level playing field across the Union, were frustrated by a number of persisting physical, technical and fiscal barriers. But while the White Paper led to the adoption of the 1986 SEA, aimed at eliminating those remaining barriers, the ECJ actively participated in the process of the abolition of tariff barriers by interpreting the Treaty provisions relating to them in such a way as to give them the widest possible scope of application.

12.4.1 The abolition of customs duties Under Article 30 TFEU: Customs duties on imports and exports and charges having equivalent effect shall be prohibited between Member States. This prohibition shall also apply to customs duties of a fiscal nature. Article 30 applies to both imports and exports. The large majority of cases relate to imports, perhaps obviously, as Member States are more likely to try to hinder imports into their markets than to try to prevent domestically produced goods from being exported. However, there have been cases where Member States have tried to prevent goods leaving their territory, as in Commission v Italy (Re Art Treasures) (see 12.3 above), Case C-173/05 Commission v Italy (Re Environmental Tax) [2007] ECR I-4917 (Italian environmental tax on methane imported from Algeria and subsequently exported to other Member States) and, more recently, Case C-305/17 FENS spol. s r.o. v Slovak Republic – Úrad pre reguláciu sieťových odvetví EU:C:2018:986 (tax on the export of electricity generated in the Member State’s territory). Customs duties can easily be identified as duties imposed on imported or exported goods on the basis of their value, and are usually designated as such. Such duties were dealt with by the ECJ in the early case of Van Gend en Loos, which ruled that the now repealed Article 12 TEEC had direct effect (see Chapter 6). Article 12 TEEC provided that Member States shall refrain from introducing between themselves any new customs duties on imports or exports or any charge having equivalent effect, and from increasing those which they already apply in their trade with each other.

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However, as can be seen from the straightforward wording of this provision, a charge having equivalent effect (CHEE) is not defined. It was for the ECJ to formulate a precise definition of this concept.

12.4.2 Charges having equivalent effect to customs duties Summarily mentioned in Article 30 TFEU, the concept of charges having equivalent effect to customs duties developed exponentially soon after the creation of the Customs Union. In Case 2-3/62 Commission v Belgium and Luxembourg (Re Gingerbread) [1962] ECR 425, the ECJ ruled that the duty on imported gingerbread was a CHEE, as it made imports more expensive by equalising the price of gingerbread. The charge concerned was a national special duty on imported gingerbread that did not contain rye. It was designed to compensate the disadvantage suffered by gingerbread producers in Luxembourg and Belgium as a result of the high domestic tax on rye, one of the principal ingredients of the product in those countries. It was not until Case 24/68 Commission v Italy (Re Statistical Levy) [1969] ECR 193 and Joined Cases 2 and 3/69 Sociaal Fonds voor de Diamantarbeiders v SA Ch Brachfeld & Sons and Chougol Diamond Co (Diamantarbeiders) [1969] ECR 211 that the Court defined a CHEE as follows: 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, and which is not a customs duty in the strict sense, constitutes a charge having equivalent effect … even if it is not imposed for the benefit of the State, is not discriminatory or protective in effect and if the product on which the charge is imposed is not in competition with any domestic product. (Diamantarbeiders, para 15; Statistical Levy, para 9) Commission v Italy was concerned with a charge of 10 lira on every 100 kg or every metric ton of goods imported or exported, to cover the cost of collecting trade statistics. In Sociaal Fonds voor de Diamantarbeiders, a Belgian law imposed a tax of 0.33% on unworked imported diamonds, which was collected to help fund the pensions of employees in the Belgian diamond industry. There are formal and substantive elements in this complete and rich definition, in which every word counts. 12.4.2.1

The nature of the charge The pecuniary nature of the charge is the first element of the Court’s definition. This helps distinguish charges having equivalent effect from measures having equivalent effect, which are covered by Article 34 TFEU (see 13.2.3). The amount of the charge is irrelevant (‘however small’). This clearly suggests that the Court is more concerned with the mechanical effect of the charge on the free movement of goods, as the tax will inevitably increase artificially the costs of the imported or exported good (see Case 46/ 76 WJG Bauhuis v The Netherlands [1977] ECR 5; Case C-209/89 Commission v Italy EU:C:1991:139, para 7; Case C-65/16 Istanbul Lojistik Ltd v Nemzeti Adó- és Vámhivatal Fellebbviteli Igazgatóság EU:C:2017:770, para 39). In the Statistical Levy case, the Court observed: The very low rate of the charge cannot change its character with regard to the principles of the Treaty which, for the purpose of determining the legality of those

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charges, do not admit of the substitution of quantitative criteria for those based on the nature of the charge. (para 14) This suffices to render the charge unlawful. (See also Case 193/85 Cooperativa CoFrutta Srl v Amministrazione delle finanze dello Stato [1987] ECR 2085, para 10.) Furthermore, the Court will ignore the designation (tax, fiscal or parafiscal charge, due, fee, etc) (see Case 229/87 Commission v Greece [1988] ECR 6347) or mode of application of the charge (whether the charge is collected by customs, financial or fiscal authorities is irrelevant) (see Case 94/74 Industria Gomma Articoli Vari IGAV v Ente nazionale per la cellulosa e per la carta ENCC [1975] ECR 699, in which ENCC was an autonomous institution governed by public law and devoid of any commercial character). Finally, a ‘charge which is triggered by the carriage of goods and which is imposed not on a product as such, but on a necessary activity in connection with the product, may fall within the scope of Article 30 TFEU’ (Case C-206/06 Essent Netwerk Noord and Others EU:C:2008:413, para 44) (emphasis added). Indeed, such a charge is regarded as being imposed on products, even though it is levied on the transport of goods or the use of roads and has to be paid by the person operating the heavy goods vehicle (Case C-90/94 Haahr Petroleum EU:C:1997:368, para 38). 12.4.2.2

The origin of the charge As suggested in former Article 12 TEEC, and in its new wording under Article 30 TFEU, which refers to charges ‘between Member States’, a CHEE is ‘unilaterally imposed’ by a national authority. National authorities are to be understood in a wide sense so as to include local government authorities or private bodies vested with public powers, such as a professional body financing general interest activities, as in Case C72/92 Firma Herbert Scharbatke GmbH v Germany [1993] ECR I-5509 (parafiscal charge credited to the German fund for the marketing of agricultural, forestry and food products).

12.4.2.3

The tax point of the charge Whether imposed on imports or exports, a charge is a CHEE by reason of the fact that the good crosses a national border. As a result, a charge imposed solely on national agricultural products would not satisfy this criterion (see Case C-355/00 Freskot AE v Elliniko Dimosio [2003] ECR I-5263, para 40). The concept of a national border extends to regional, internal State borders. In Case C-163/90 Administration des Douanes et Droits Indirects v Léopold Legros and others [1992] ECR I-4625, an octroi de mer (dock due) applicable on the entry of goods imported from another Member State into Réunion, a French overseas territory, was deemed to be a CHEE despite the fact that such charge was also imposed on goods entering that territory from another part of France (para 27) (see also Case C-363/93 René Lancry SA v Direction Générale des Douanes and Société Dindar Confort [1994] ECR I-3957). This ruling also applied to an ad valorem charge imposed on the import and export of goods in the Dodecanese region of Greece (Joined Cases C-485 and 486/ 93 Simitzi v Dimos Kos [1995] ECR I-2655). In Case C-72/03 Carbonati Apuani Srl v Comune di Carrara [2004] ECR I-8027, a charge levied by the town of Carrara on marble excavated within its territory that was being transported across the boundaries of a municipal territory, was regarded as a CHEE on exports, ‘despite the fact that it is imposed also on goods the final destination of which is within the Member State

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concerned’ (para 23). Soon after, the Court confirmed this ruling in a case concerning a charge imposed by the Jersey Potato Export Marketing Board on the export of Jersey potatoes to the United Kingdom (Case C-293/02 Jersey Produce Marketing Organisation Ltd v States of Jersey and Jersey Potato Export Marketing Board [2005] ECR I-9543). Furthermore, transit duties or other charges imposed in respect of transit also fall foul of Article 30 TFEU (Case 266/81 SIOT EU:C:1983:77, para 19 and Istanbul Lojistik Ltd, para 42).

12.4.3 Permissible charges Although there is no express derogation from Article 30 TFEU (since Article 36 TFEU applies solely to measures having equivalent effect to a quantitative restriction and not to charges having equivalent effect to a customs duty (Art Treasures, 12.3 above, at 429–30 and Case 29/87 Dansk Denkavit EU:C:1988:299, para 32)), a charge imposed by a Member State that would otherwise be a breach of Article 30 will not be a CHEE if it relates to a general system of internal dues applied systematically and in accordance with the same criteria to domestic products and imported products alike …, it constitutes payment for a service in fact rendered to the economic operator of a sum in proportion to the service …, or again, subject to certain conditions, it attaches to inspections carried out to fulfil obligations imposed by [EU] law … (Case 18/87 Commission v Germany (Re Inspection Fees on Live Animals) [1988] ECR 5427, para 6) 12.4.3.1

Charges as fees for services rendered by the Member State A common defence used by the Member State suspected of levying unlawful charges is that the disputed charge ‘constitutes consideration for a service rendered’ and ‘is in the nature of quid pro quo’ (Statistical Levy, 12.4.2 above, para 15). The ECJ has accepted the validity of such defence, provided the disputed charge satisfies three criteria. In Case 340/87 Commission v Italy (Re Inspections and Formalities Outside Customs Office Hours) [1989] ECR 1483 the Court observed that [t]he Court has consistently held that a charge imposed on goods by reason of the fact that they cross a frontier is not a charge having equivalent effect prohibited by the Treaty if it constitutes consideration for a specific service actually and individually rendered to the trader, in an amount proportionate to that service (see the judgment of 26 February 1975 in Case 63/74 W Cadsky v Istituto Nazionale per il Commercio Estero [1975] ECR 281). For that to be so there must be a specific or individual benefit provided to the trader. (para 15) The service must be effective and genuine A service is a genuine one when a real benefit is provided to the trader, as opposed to general administrative formalities imposed on all traders in consideration of which a fee is levied. In Case 266/81 Società Italiana per l’Oleodotto Transalpino (SIOT) v Ministero delle finanze [1983] ECR 731, the Court accepted that an Italian charge imposed on a company running a transalpine oil pipeline, for crude oil imported from countries that were not parties to the General Agreement on Tariffs and Trade (GATT) and transported to Germany and Austria, was a charge for a genuine service. Indeed, the company used ‘harbour waters or installations for the navigability and maintenance of

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which the public authorities were responsible’ (para 23). By contrast, the costs of inspections and administrative formalities carried out during the normal business hours of customs offices at frontier posts, in accordance with a European directive, could not be regarded as payments for genuine services (Re Inspections and Formalities Outside Customs Office Hours). From this it follows that the service must be optional and cannot be mandatory (Case C-119/92 Commission v Italy (Re Customs Forwarding Agents) [1994] ECR I393). As a result, the Court has always rebutted any attempts by Member States to justify veterinary, sanitary and technical inspections as genuine optional services on the ground that such inspections would encourage free movement of goods (Case 87/ 75 Bresciani v Amministrazione Italiana delle Finanze [1976] ECR 129), even in a case where the inspection is ‘provided for by an international convention intended to encourage the free importation of plants into the countries of destination by establishing a system of inspections in the exporting State, recognised and organised on a reciprocal basis’ (Case C-111/89 Netherlands v P Bakker Hillegom BV [1990] ECR I-1735). The service is for the sole benefit of the trader The service must be provided specifically to the trader. Any charge for a service rendered in the general interest of traders would be deemed a CHEE. This would be the case as regards fees for veterinary or sanitary inspections, or quality controls imposed on agricultural products. This is well illustrated by Case 63/74 W Cadsky SpA v Istituto Nazionale per il Commercio Estero [1975] ECR 281, in which the Court ruled that an Italian quality control on fruit and vegetables for export, coupled with a prohibition on exporting products that did not meet the quality standards, could not be regarded as a service provided for the benefit of an individual exporter, as its alleged benefit related to the general interest of all Italian exporters (paras 7 and 8). Equally, in Case C-389/00 Commission v Germany (Re Export of Waste) [2003] ECR I-2001 a German mandatory contribution to a solidarity fund for the return of illegally exported waste, imposed on shipments of waste to other Member States, was not deemed to be related to a service provided specifically to the German exporters of waste, since this contribution was collected on all waste shipments and was determined according to the type and quantity of waste to be shipped. The Court then concluded that ‘the disputed contribution [could] not be considered as payment for a service actually provided specifically to the economic operators in question’ (para 37). The charge must be proportionate to the actual cost of the service The fee must only cover the actual cost of the genuine service. Any fee calculated according to the weight, or length or invoice value of a good would be regarded as a CHEE, even if the total amount charged did not exceed the total amount of the costs of the service (Case C-111/89 Netherlands v Bakker Hillegom [1990] ECR I-1735). The fee must therefore be calculated precisely, and could in no case be calculated on an ad valorem basis (Case 170/88 Ford España SA v Spain [1989] ECR 2305).

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se

ca ple In Case C-209/89 Commission v Italy [1991] ECR 1575, the Commission brought an m exa enforcement action against the Italian Government for a declaration that the Italian system of charges payable by businesses where customs formalities were completed outside the customs area or outside normal office hours was contrary to former Articles 9, 12, 13 and 16 TEEC (now Article 30 TFEU), on the ground that where services were rendered simultaneously to several businesses in connection with customs formalities, each business was required to pay a single payment based on the nature and length of the most expensive service provided. According to the Commission, this single payment was disproportionate to the actual cost of the service rendered to each business, and therefore constituted a CHEE. Where the service required concerned a single consignment of goods belonging to several owners, the service was deemed to have been provided in respect of a single owner. Furthermore, in calculating the charges payable by the businesses, any fraction of an hour’s work by the Italian customs officers was reckoned as a full hour. The Court ruled that while a fee could be calculated on the basis of a fixed-rate assessment of costs, such as a fixed hourly rate, ‘the method of calculation applied in Italy [could] lead, for example, to five traders each being required to pay the charge per hour for a total of 30 minutes’ work’. Such charge would therefore be deemed to be in excess of the actual cost of the customs inspection.

12.4.3.2

Charges attached to inspections required under EU law It is also important to distinguish a CHEE from a charge attached to a service or an inspection required under EU law or an international agreement binding on the EU. Such charge is lawful (Bauhuis, para 31), provided the charge satisfies four criteria set out by the ECJ in Re Inspection Fees on Live Animals (12.4.3 above). The Court ruled that fees on the importation of live animals from other Member States to cover the costs of veterinary inspections carried out under Council Directive 81/389/EEC of 12 May 1981 [m]ay not be classified as charges having an effect equivalent to a customs duty if the following conditions are satisfied: (a) they do not exceed the actual costs of the inspections in connection with which they are charged; (b) the inspections in question are obligatory and uniform for all the products concerned in the [EU]; (c) they are prescribed by [EU] law in the general interest of the [EU]; (d) they promote the free movement of goods, in particular by neutralizing obstacles which could arise from unilateral measures of inspection adopted in accordance with Article 36 of the Treaty. (para 8) (See also Case 89/76 Commission v Netherlands [1977] ECR 1355 (phytosanitary inspections on exportation provided for by an International Convention) and Case 1/ 83 IFG v Freistaat Bayern [1984] ECR 349 (charge for health controls on fresh meat imported from non-Member countries under a 1972 EC Directive on health problems affecting intra-European trade in fresh meat).) Charges imposed on domestic goods only The Court of Justice accepts a degree of reverse discrimination against domestic goods when no goods are crossing a State border. It is then a purely internal matter with no EU element. In Case 222/82 Apple and Pear Development Council v KJ Lewis Ltd [1983] ECR 4083 (see 13.2.1.1 and 13.2.3.3.1), a number of UK growers challenged a compulsory

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levy imposed on apples and pears grown in the UK. The levy was imposed to fund the A&PDC (a semi-public body that conducted research, compiled statistics and provided information, publicity and promotion), but was not imposed on apples and pears imported into the UK. The Court ruled that since the levy did not apply to imports, there was no breach of former Articles 9 to 16 TEEC (now Article 30 TFEU) (para 30). Charges imposed on domestic and imported goods What happens if a charge is imposed on both imports and domestic products of the charging Member State? Whether a charge imposed on both imported and domestic goods breaches Article 30 TFEU will depend on: (a) the nature of the charge; (b) the method of calculation; and (c) the use to which the charge is put (who benefits from the charge). Charges that are identical and imposed as part of a general system of tax may or may not be prohibited under Article 110 TFEU as discriminatory internal taxes (see 12.4.4 below) but are not subject to Article 30 TFEU. However, if the same charges are imposed on all goods but are imposed in a different way on the imported goods, they will be in breach of Article 30. In Case 29/72 SpA Marimex v Italian Finance Administration [1972] ECR 1309, imported meat was subject to an inspection and to a veterinary inspection tax. Domestic meat was subject to the same rate of charge, but it was imposed on different criteria and by a different national body. The Court concluded that the charge on imported meat constituted a CHEE. Equally, if the same charge is imposed on both imported and domestic goods but the benefits of the charge are enjoyed exclusively by the domestic goods, this will constitute a CHEE (Case 77/72 Capolongo v Azienda Agricola Maya [1973] ECR 611, regarding a charge on egg boxes, the benefit of which went to the Italian paper and cardboard industry; and Case 77/76 Fratelli Cucchi v Avez SpA [1977] ECR 987, regarding a charge on domestic and imported sugar intended to finance the Italian beet producers and sugar industry).

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CHARGES HAVING EQUIVALENT EFFECT TO CUSTOMS DUTIES Is it a pecuniary charge? Is it unilaterally imposed by a national authority? Is it imposed by reason of the fact that the good crosses the border? (Statistical Levy and Diamantarbeiders cases) Yes CHEE unlawfaul under Article 30 TFEU

No Not a CHEE

Is it a permissible charge? (Case 18/87 Commission v Germany) CHARGE FOR SERVICES RENDERED? Is it a charge for a genuine service? Is it for the benefit of economic operators? Is the charge commensurate with the actual cost of the service? If yes, then lawful under Article 30 TFEU

CHARGE FOR INSPECTION? Is it a charge attached to an inspection required under EU Law? Is the inspection obligatory and uniform for all products concerned in the EU? Is the charge commensurate with the actual cost of the inspection? If yes, then lawful under Article 30 TFEU

Figure 12.1 Charges having equivalent effect to customs duties

12.4.4 The prohibition of discriminatory internal taxation It is for each Member State to determine its own systems of taxation and rates of internal tax. Politically, this is a very important issue, as the ability of a Member State to set its own taxes is seen as a question of sovereignty by individual Member States. The Court of Justice also recognises that Member States have wide discretion over taxation policy, as it observed in Case 243/84 John Walker & Sons Ltd v Ministeriet for Skatter og Afgifter [1986] ECR 875: [EU] law at its present stage of development does not restrict the freedom of the Member States to lay down arrangements which differentiate between certain products on the basis of objective criteria, such as the nature of the raw materials used or the production process employed. Such differentiation is compatible with [EU] law if it pursues objectives of economic policy which are themselves compatible with the requirements of the [TFEU] and its secondary legislation, and if the detailed rules are such as to avoid any form of discrimination, direct or indirect, in regard to imports from other Member States or any form of protection of competing domestic products. (para 22) Under Article 110 TFEU: 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.

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Furthermore, 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. Article 110 TFEU does not prohibit Member States from setting their own taxation, but rather seeks to prevent discrimination in the rate and application of such taxation as between domestic and imported goods. As such, these provisions have to be seen as complementing those of Article 30 TFEU, as the Court observed in Case C-290/05 Nádasdi v Vám- és Pénzügyörség Észak-Alföldi Regionális Parancsnoksága and Case C333/05 Németh v Vám- és Pénzügyörség Dél-Alföldi Regionális Parancsnoksága [2006] ECR I-10115: [W]ithin the system of the [TFEU], Article [110 TFEU] supplements the provisions on the abolition of customs duties and charges having equivalent effect. Its aim is to ensure free movement of goods between the Member States in normal conditions of competition by the elimination of all forms of protection which may result from the application of internal taxation that discriminate against products from other Member States … (para 45) (See also Case C-586/14 Budişan EU:C:2016:421, para 19.) Therefore, an internal taxation can only be considered compatible with Article 110 TFEU if it is structured so as to exclude any possibility of imported goods being taxed more heavily than domestic ones so that it cannot have any discriminatory effect (Case C-10/08 Commission v Finland EU:C:2009:171, para 24; Case C-437/12 X EU:C:2013:857, para 28; Case C-640/17 Luís Manuel dos Santos v Fazenda Pública EU:C:2018:275, para 14). Naturally, and logically, if Articles 30 and 110 complement each other, they are mutually exclusive. In Case C-221/06 Stadtgemeinde Frohnleiten (12.3 above), the Court made it clear that [TFEU] provisions relating to charges having equivalent effect and those relating to discriminatory internal taxation cannot be applied together, so that under the system of the Treaty the same measure cannot belong to both categories at the same time. (para 26) 12.4.4.1

‘Genuine tax’ The distinction between a CHEE and an internal tax is a very important one to make, as the former is by definition presumed to be unlawful (save in exceptional circumstances) while the latter is always presumed lawful unless it is discriminating against imported goods (Case C-228/98 Charalampos Dounias v Ypourgio Oikonomikon [2000] ECR I-577, paras 39–41). Furthermore, while a CHEE is levied when goods cross a national border, an internal tax is part of the national fiscal policy and is not concerned with the provenance of the goods. As the Court put it in Case 90/79 Commission v France (Re Levy on Reprographic Machines) [1981] ECR 283, an internal taxation measure is part of ‘[a] general system of internal dues applied systematically to categories of products in accordance with objective criteria irrespective of the origin of the product’ (para 14). For instance, an Austrian standard fuel consumption tax (Normverbrauchsabgabe) imposed on motor vehicles belonging to individuals by reason of their registration in Austria upon the owners’ transfer of their residence to Austria, was regarded as an internal tax whose compatibility with EU law could only be examined under Article 110 TFEU and not Article 30 TFEU (Case C-387/01 Weigel and Weigel v Finanzlandesdirektion für Vorarlberg [2004] ECR I-4981, para 81; see also Case C-290/

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05 Nadasdi and C-333/05 Németh [2006] ECR I-10115, paras 40–42; and Case C-313/ 05 Brzezinski v Dyrektor Izby Celnej w Warszawie [2007] ECR I-513, paras 22–24). However, there is sometimes a very fine line between the two types of taxes, and the distinction between them is not always as clear-cut as the Court’s definition of an internal tax might suggest. Indeed, while a tax may be part of a general system of dues, it might alternatively be a ‘de facto’ tax levied on imported products in the absence of similar domestic products. This was the situation, for instance, in Cooperativa CoFrutta Srl, in which an Italian tax was levied on the consumption of fresh bananas originating from Colombia and imported from the Benelux, in circumstances in which there was only a very small domestic production of bananas in Sicily (120 tonnes as opposed to 357,500 tonnes of imported bananas). In this case the Court observed: The essential feature of a charge having an effect equivalent to a customs duty which distinguishes it from an internal tax therefore resides in the fact that the former is borne solely by an imported product as such whilst the latter is borne both by imported and domestic products. The Court has however recognized that 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 a charge having equivalent effect but internal taxation within the meaning of Article [110] of the Treaty 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. (paras 9, 10) As a result, even if in some circumstances low domestic production could be equated with non-existence of a product, a levy would not necessarily be regarded as a CHEE, especially if it is part of a general system of taxation, as was the case as regards the Italian tax concerned. In Stadtgemeinde Frohnleiten (12.3 above), which involved the Austrian taxation of a deposit of waste coming from Italy at the Frohnleiten municipal waste disposal site, the Court decided that the measure was an internal tax, as it was levied irrespective of the origin of the waste and not because the waste crossed the Austrian border. However, it was considered as discriminatory under Article 110 TFEU on the ground that some of the exemptions from the levy benefited only domestic waste (para 73). By contrast, in Case C-109/98 CRT France International SA v Directeur régional des impôts de Bourgogne [1999] ECR I-2237 the Court found that a French flat-rate tax on transmitting-receiving sets operating on two-way channels (‘CB sets’) could not be regarded as an internal tax as it was undisputed that there was no domestic production of CB sets. Therefore, in deciding whether a tax is a genuine internal tax, one needs to consider whether it fits into the overall system of internal taxation of the Member State, or whether it has been superimposed on the system for a particular purpose, in which case it is more likely to be subject to Article 30 TFEU. 12.4.4.2

Application of Article 110 TFEU As the Court of Justice put it in Case C-167/05 Commission v Sweden (Re Beer and Wine Taxes) [2008] ECR I-2127: Article [110 TFEU], as a whole, has the aim of ensuring free movement of goods between the Member States in normal conditions of competition through the elimination of all forms of protection which may result from the application of

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internal taxation that discriminates against products from other Member States and the complete neutrality of internal taxation as regards competition between domestic products and imported products. (para 40) As with Article 30 TFEU, the Court of Justice has held that Article 110 TFEU has direct effect (Case 57/65 Alfons Lütticke GmbH v Hauptzollamt Sarrelouis [1966] ECR 205, at 211). ‘Similar products’ Under the first paragraph of Article 110 TFEU, Member States must not discriminate directly or indirectly against imported products by imposing on them any internal taxation in excess of that imposed on similar domestic products. In other words, the same tax rate must be applied to similar imported and domestic products. In Case C-74/06 Commission v Greece (Re Taxes on Second-Hand Cars) [2007] ECR I-7585, the Court observed that [The first paragraph of] Article [110 TFEU] is infringed where the taxation on the imported product and that on the similar domestic product are calculated in a different manner on the basis of different criteria which lead, even if only in certain cases, to higher taxation being imposed on the imported product. (para 25) Article 110 TFEU does not require the domestic and imported products to which the discriminatory tax applies to be identical; it only requires them to be ‘similar’. Consistent with its approach to the interpretation of other Treaty provisions, the Court of Justice has defined ‘similar products’ widely, so as to catch as many discriminatory internal taxes as possible. Two tests have been used over time by the Court of Justice: (a) On the one hand, under the formal test, the Court examines whether the products in question come within some fiscal, customs or statistical classification. Case 27/ 67 Firma Fink-Frucht GmbH v Hauptzollamt München-Landsbergerstrasse [1968] ECR 223, in which the Court was dealing with a German equalization tax imposed on imported sweet peppers, is a good illustration of this test: Similarity between products within the meaning of the first paragraph of Article [110] exists when the products in question are normally to be considered as coming within the same fiscal, customs or statistical classification, as the case may be. (at 232) (b) On the other hand, the broad test combines a factual comparison of the products with an economic analysis of their use. In Case 106/84 Commission v Denmark (Re Taxes on Wine) [1986] ECR 833, in which the Commission brought an action for annulment against Denmark for taxing wine made from grapes at a higher rate than wine made from other fruit, the Court considered the objective characteristics of the products and their capability of meeting the same need from the customer’s point of view: In order to determine whether products are similar within the terms of the prohibition laid down in the first paragraph of Article [110] it is necessary to consider … whether they have similar characteristics and meet the same needs from the point of view of consumers. The Court endorsed a broad interpretation of the concept of similarity in its judgments of 27 February 1980 in Case 168/78 (Commission v France [1980] ECR 347) and 15 July

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1982 in Case 216/81 (Cogis v Amministrazione delle Finanze dello Stato [1982] ECR 2701) and assessed the similarity of the products not according to whether they were strictly identical, but according to whether their use was similar and comparable. Consequently, in order to determine whether products are similar it is necessary first to consider certain objective characteristics of both categories of beverages, such as their origin, the method of manufacture and their organoleptic properties, in particular taste and alcohol content, and secondly to consider whether or not both categories of beverages are capable of meeting the same need from the point of view of consumers. (para 12) Case C-302/00 Commission v France (Re Tobacco) [2002] ECR I-2055 can be regarded as an even better illustration of this test. The Commission brought an action for annulment against a French law imposing different tax rates on dark-tobacco and light-tobacco cigarettes, to the disadvantage of the latter. The Court observed: According to the settled case-law of the Court, which has interpreted the concept of similarity widely, in order to determine whether products are similar it is necessary to consider whether they have similar characteristics and meet the same needs from the point of view of consumers, the test being not whether they are strictly identical but whether their use is similar and comparable … It is important to note as a preliminary point that dark- and light-tobacco cigarettes are manufactured from different types of the same base product, tobacco, using comparable processes. While the organoleptic characteristics of dark- and light-tobacco cigarettes, such as their taste and smell, are not identical they are nevertheless similar. … [T]he difference between dark and light-tobacco cigarettes is one of degree. Under [the French] provision, cigarettes which contain a minimum of 60% of certain types of tobacco are considered to be dark-tobacco cigarettes while all the rest are considered to be light-tobacco cigarettes. Further, the two types of products can satisfy the same needs of consumers, given their similar properties, since they are intended for tobacco consumption in the typical form of cigarettes, that is ready-made cylinders of tobacco rolled in sheets of paper. The fact that the average age of consumers of dark-tobacco is clearly higher than the average age of consumers of light-tobacco cannot cast doubt on that finding. Moreover, the similarity of dark- and light-tobacco cigarettes is recognised by the [EU] legislature which, in Directives 95/59 and 92/79, provides for uniform tax treatment for all cigarettes. (paras 23–27) ‘Products in competition’ Under the second paragraph of Article 110 TFEU, no Member State shall impose on products from other Member States any internal taxation of such a nature as to afford indirect protection to other products. The domestic and imported products do not need to be ‘similar’ for the second paragraph of Article 110 to apply. However, this provision will apply to any form of indirect tax protection of domestic products over imported products that, although not necessarily ‘similar’, are nevertheless in partial, indirect or potential competition. In effect, the second paragraph of Article 110 is wider in its application than the first paragraph. The Commission has brought cases against Member States under the enforcement procedure concerning domestic taxes relating to alcohol that allegedly favoured

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domestic products over imported alcohol. One such case was Commission v Sweden, which was concerned with a Swedish law imposing internal taxes of such a nature as to afford indirect protection to beer, mainly produced in Sweden, as compared with wine, which was mainly imported from other Member States. The Court applied an economic test, using cross-elasticity of demand and past and future consumer preference: [I]t is appropriate to determine whether the higher taxation of wine as compared with strong beer is such as to have the effect, on the market in question, of reducing potential consumption of imported products to the advantage of competing domestic products … In that respect, account must be taken of the difference between the selling prices of the products in question and the impact of that difference on the consumer’s choice, as well as to changes in the consumption of those products … To arrive at that assessment, a method of comparison finally accepted by both parties, based on a litre of beer and a litre of wine, must be used, since the Commission has failed to establish the relevance to the present case of any other method. … The comparison of the relationship between the selling prices of a litre of strong beer and a litre of wine in competition with strong beer thus makes it clear that the difference in price between those two products is virtually the same before taxation as after taxation. In those circumstances, even though the difference between the respective selling prices of beer and competing wines is narrower than that found by the Court in Commission v Belgium, it must be pointed out that the difference in selling price found in the present case is nevertheless such that the difference in the tax treatment of those two products is not liable to influence consumer behaviour in the sector concerned. (paras 52–54 and 57) In another landmark case, Case 170/78 Commission v UK (Re Excise Duties on Wine) [1980] ECR 417, in which the UK imposed a higher rate of tax on wine than on beer, the Commission accepted that beer and wine were not ‘similar products’ under the first paragraph of Article 110, but claimed a breach of the second paragraph of Article 110 as the different taxes indirectly protected UK alcohol (most beer consumed in the UK was domestically produced) over imported alcohol (most wine consumed in the UK was imported). The case involved a close economic analysis of the competitive relationship between beer and wine. The Court ruled that when considering whether different products are ‘in competition’ with each other, one must take into account whether: (a) the products are capable of meeting the same needs of consumers (when consumers need a drink, do they need beer or wine, or just alcohol?); and (b) there is a degree of substitution or interchangeability between the different products known as price elasticity or cross-elasticity of demand (how much does the price of beer have to go up before consumers transfer their preference to wine, and vice versa). The Court stated: As regards the question of competition between wine and beer, the Court considered that, to a certain extent at least, the two beverages in question were

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capable of meeting identical needs, so that it had to be acknowledged that there was a degree of substitution, one for the other. It pointed out that, for the purpose of measuring the possible degree of substitution, attention should not be confined to consumer habits in a Member State or in a given region. Those habits, which were essentially variable in time and space, could not be considered to be immutable; the tax policy of a Member State must not therefore crystallize given consumer habits so as to consolidate an advantage acquired by national industries concerned to respond to them. … In view of the substantial differences in the quality and, therefore, in the price of wines, the decisive competitive relationship between beer, a popular and widely consumed beverage, and wine must be established by reference to those wines which are the most accessible to the public at large, that is to say, generally speaking, the lightest and cheapest varieties. Accordingly, that is the appropriate basis for making fiscal comparisons by reference to the alcoholic strength or to the price of the two beverages in question. (paras 8 and 12) The Court of Justice will take into account different competitive criteria, such as respective prices, strengths of alcohol, consumer drinking habits, etc. Further, it considers not only the present situation, but also possible future developments (for example, consumer trends towards increasingly substituting wine for beer). The Court was somewhat visionary in this regard, for since the case was heard in 1980, the consumption of wine has become much more commonplace in the UK, and now accounts for a larger percentage of the overall alcohol market than it did 35 years ago. Overall, the fiscal policy of a Member State should not be allowed to prevent future and potential competitiveness, by taxing more heavily the potentially competing imported goods. 12.4.4.3

Direct and indirect discrimination In deciding whether there is any direct or indirect discrimination, the Court of Justice will insist on strict equality as regards the treatment of both domestic and imported goods. To that purpose, it will consider not only the rate of tax but also the basis of assessment and the rules for collection, including disproportionately high penalties for non-payment (or late payment) on imported goods. Two types of discrimination are prohibited under the first paragraph of Article 110 TFEU: (a) direct discrimination, where an internal tax is imposed on imports only; and (b) indirect discrimination, where a national taxation measure applies to all relevant goods, imported and domestic, but falls more heavily on imported goods. Direct discrimination A national tax that is directly discriminatory cannot be justified by the Member State and will automatically be in breach of Article 110 TFEU since it is imposed on imports only. In Case 55/79 Commission v Ireland (Re Taxation of Alcohol) [1980] ECR 489, the discriminatory application of provisions relating to the deferment of payment of excise duty on spirits, beer and wine in Ireland, where importers had to pay the tax on imports immediately on importation while domestic producers were given a number of weeks to pay the tax, was ruled to be a breach of former Article 95 TEEC (now Article 110 TFEU), although the same tax was imposed on both domestic and

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imported goods (see also Lütticke (only imports were taxed) and Case C-90/94 Haahr Petroleum Ltd v Åbenrå Havn and others [1997] ECR I-4085 (imports were taxed at a higher rate than domestic products)). Indirect discrimination In Case 112/84 Humblot v Directeur des services fiscaux [1985] ECR 1367, France imposed a tax on cars that was calculated by reference to the power of their engines. As it happened, the most powerful vehicles (which were all imported, as there were no French cars as powerful) were subject to a disproportionately high tax. The cut-off point was 16 CV. Below this (covering all French cars), the tax was determined on a sliding scale up to a maximum of 1,100 FF; but for cars over 16 CV, there was a significant increase, with the tax rising to 5,000 FF. The Court found the French tax constituted indirect discrimination, as the same rules applied to both imports and domestically produced cars: [T]here are two distinct taxes: a differential tax which increases progressively and is charged on cars not exceeding a given power rating for tax purposes and a fixed tax on cars exceeding that rating which is almost five times as high as the highest rate of the differential tax. Although the system embodies no formal distinction based on the origin of products it manifestly exhibits discriminatory or protective features contrary to Article [110] since the power rating determining liability to the special tax has been fixed at a level such that only imported cars, in particular from other Member States, are subject to the special tax whereas all cars of domestic manufacture are liable to the distinctly more advantageous differential tax. (para 14) Furthermore, there was no objective justification for the high tax to be charged on the (highly-powered) imported cars: Article [110 TFEU] prohibits the charging on cars exceeding a given power rating for tax purposes of a special fixed tax the amount of which is several times the highest amount of the progressive tax payable on cars of less than the said power rating for tax purposes, where the only cars subject to the special tax are imported, in particular from other Member States. (para 16) There will not be a breach of Article 110 TFEU in respect of an indirectly discriminatory domestic tax if the Member State can show that the criteria for imposing the indirectly discriminatory tax are objectively justified, that is, for reasons not based on the nationality of the products. In Case 140/79 Chemial Farmaceutici SpA v DAF SpA [1981] ECR 1, Italy taxed synthetic ethyl alcohol (made from a petrochemical derivative) more highly than natural (fermented) ethyl alcohol. Very small quantities of synthetic ethyl alcohol were produced in Italy, and most of the product sold in Italy was imported. Italy claimed that the relevant petro-chemical derivative should be saved for more important uses than producing synthetic ethyl alcohol. The Court ruled that the Italian tax was justified on objective criteria, as it was not based on the nationality of the goods. Therefore, there was no breach of Article 110 TFEU: As the Court has stated on many occasions …, in its present stage of development [EU] law does not restrict the freedom of each Member State to lay down tax arrangements which differentiate between certain products on the basis of objective criteria, such as the nature of the raw materials used or the production processes employed. Such differentiation is compatible with [EU] law if it pursues economic policy objectives which are themselves compatible with the

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requirements of the Treaty and its secondary law and if the detailed rules are such as to avoid any form of discrimination, direct or indirect, in regard to imports from other Member States or any form of protection of competing domestic products. Differential taxation such as that which exists in Italy for denatured synthetic alcohol on the one hand and denatured alcohol obtained by fermentation on the other satisfies these requirements. It appears in fact that that system of taxation pursues an objective of legitimate industrial policy in that it is such as to promote the distillation of agricultural products as against the manufacture of alcohol from petroleum derivatives. That choice does not conflict with the rules of [EU] law or the requirements of a policy decided within the framework of the [EU]. (paras 14–15)

se

ca ple In Case 243/84 John Walker & Sons Ltd v Ministeriet for Skatter og Afgifter [1986] ECR m exa 875, the Danish Østre Landsret referred to the Court of Justice for a preliminary ruling questions concerning the compatibility with former Article 95 TEEC (now Article 110 TFEU) of a system of differential taxation applied under Danish tax legislation to Scotch whisky and fruit wine of the liqueur type. Fruit wine of the liqueur type of an alcoholic strength not exceeding 20% by volume was subject to a specific duty, calculated per litre of the product. Scotch whisky, however, like other spirits, as well as fruit wine of the liqueur type of an alcoholic strength exceeding 20% by volume and grape wine of the liqueur type exceeding 23% by volume, was subject to a levy consisting of a specific duty imposed per litre of pure ethyl alcohol and a duty proportionate to the highest selling price charged by wholesalers. The Danish tax legislation did not define ‘fruit wine’. With regard to determining the similarity between Scotch whisky and fruit wine, the Court of Justice first considered certain objective characteristics of both alcohols, such as their origin, the method of manufacture and their organoleptic properties, in particular taste and alcohol content; and, secondly, considered whether or not both alcohols were capable of meeting the same needs from the point of view of consumers. The Court noted that they exhibited different characteristics. Fruit wine of the liqueur type was a fruit-based product obtained by natural fermentation, whereas Scotch whisky was a cereal-based product obtained by distillation. The organoleptic properties of the two products were also different. For the products to be regarded as similar, the raw material (here alcohol) also had to be present in more or less equal proportions in both products. In that regard, the alcoholic strength of Scotch whisky was 40% by volume, whereas the alcoholic strength of fruit wine of the liqueur type, to which the Danish tax legislation applied, did not exceed 20% by volume. The Court therefore concluded that Scotch whisky and fruit wine of the liqueur type could not be regarded as similar products. The Court then examined whether the two products could be regarded as being in competition. On the basis of the documents and observations presented to the Court, it concluded that without there being any need to ascertain whether there exist[ed] a competitive relationship between Scotch whisky and fruit wine of the liqueur type, … at the present stage of its development, [EU] law … did not preclude the application of a system of taxation which differentiated between certain beverages on the basis of objective criteria. Such a system did not favour domestic producers if a significant proportion of domestic production of alcoholic beverages fell within each of the relevant tax categories. (para 23)

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INTERNAL TAXATION Is the taxation part of a general system of taxation? (Case C-90/79 Commission v France) If yes Is the taxation imposed on imported goods that are similar to domestic ones? (Case C-302/00 Commission v France (Re Tobacco)) Article 110, 1st para TFEU Does the taxation directly discriminate against imported goods? (Case 55/79 Commission v Ireland) If yes Unlawful under Article 110, 1st para TFEU

Is the taxation imposed on imported goods that are in competition with domestic goods? (Case 170/78 Commission v UK (Re Excise Duties on Wine)) Article 110, 2nd para TFEU

Does the taxation indirectly discriminate against imported products? (Case 112/84 Humblot) If yes and it is not objectively justified Unlawful under Article 110, 1st para TFEU

Does the taxation have a protective effect in favour of domestic products? If yes Unlawful under Article 110, 2nd para TFEU

Figure 12.2 Discrimination in internal taxation

12.5 Further reading Banks K, ‘The Application of the Fundamental Freedoms to Member State Tax Measures: Guarding against Protectionism or Second-guessing National Policy Choices?’ (2008) 33 EL Rev 482. Barents C, ‘Charges of Equivalent Effect to Customs Duties’ (1978) 15 CML Rev 415. Cordewener A, Kofler G and Van Thiel S, ‘The Clash Between European Freedoms and National Direct Tax Law: Public Interest Defences Available to the Member States’ (2009) 46 CML Rev 1951. Easson A, ‘The Spirits, Wine and Beer Judgments: A Legal Mickey Finn?’ (1980) 5 EL Rev 318. Oliver P and Enchelmaier S, ‘Recent Developments in the Case-Law’ (2007) 44 CML Rev 649. Snell J, ‘Non-Discriminatory Tax Obstacles in Community Law’ (2007) 56 ICLQ 339. Summary

ry ma sum

At the heart of the European internal market, within which the free movement of goods is ensured, is the Customs Union. The European Customs Union represents a more advanced form of economic integration than a simple free trade area like the European Free Trade Area (EFTA), the North American Free Trade Area (NAFTA) or the ASEAN Free Trade Area (AFTA). It involves not only the abolition between Member States of all customs duties and charges having equivalent effect on imports and exports, but also the adoption of a common customs tariff applicable to all goods imported from third countries into the European single market. Furthermore, while Member States have wide discretion over taxation policy, they may not use internal taxes in such a way as to discriminate against products of other Member States that are either similar to or in competition with domestic products.

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‘Salad Days Bv’ (SDBv) is a Dutch company based in Maastricht. It buys salad crops (lettuce, tomatoes, etc) from around 50 farmers in Limburg. Most of the salad is then sold in the Netherlands, but SDBv is trying to sell more of the products into Belgium and Germany. However, it has encountered the following issues with the German customs authorities: (a) The German customs authorities subject the crops to random health checks to ensure that they are safe for human consumption. The German charge a fee for that health check. SDBv accepts that the health check is possibly necessary, and it does not object to that per se. However, it is not happy paying a fee for its products being subject to the health check (which must be paid before the products inspected are ‘released’ by the customs authorities). (b) The health check referred to in (a) above can delay the transportation of the salad products out of the German customs warehouses by up to 24 hours. To try to ensure that the freshness of the salad products are not adversely affected by such delays, the German authorities put the salad products into refrigerated storage from their arrival at the German border, until they have been checked and ‘released’. The German authorities charge a fee based on the weight of the products stored, fixed at a set rate, however long the products are stored in the facilities. Advise Salad Days Bv whether it can challenge the fees in (a) and (b) above under the EU law relating to the free movement of goods. ‘Autant-en-emporte-le-vent’ SA is a French company that specialises in the importation of windsurfing boards from the EU. It has recently learned that the French government intends to impose heavy taxes on windsurfing boards to discourage windsurfing, as reports have suggested that those engaged in windsurfing are reckless towards other sailors in the way they sail their boards and therefore constitute a danger to public health. This legislative measure is likely to adversely affect its business. Very few windsurfing boards are manufactured in France, but there is a booming sailing boat manufacturing industry. Advise ‘Autant-en-emporte-le-vent’ SA as to whether the above proposed legislative measure is compatible with Article 110 TFEU.

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After reading this chapter, you will be able to understand: • the definition of a quantitative restriction • the definition of a measure having equivalent effect to quantitative restrictions under the Dassonville formula • the Cassis de Dijon principle of mutual recognition • the limits of the Dassonville formula • the concept of measures governing ‘certain selling arrangements’ • the market access approach • measures having equivalent effect under Article 35 TFEU.

13.1 Introduction The process of free movement of goods is articulated around the prohibitive and preventive approaches (negative and positive harmonisation). Both have gradually become more complementary since the early 1980s, even though the first approach still seems to prevail today. With the creation of the Customs Union, the prohibitive approach aimed to abolish or prohibit any measure from a Member State constituting a hindrance to trade within the European single market. It therefore specifically targets individual behaviour of Member States that is incompatible with their Treaty obligations. Used in Articles 25–28 and 110 TFEU for tariff barriers (see 12.4), this approach is also at the heart of Articles 34–37 TFEU on non-tariff barriers. In contrast, the preventive approach is more holistic, being designed to anticipate and prevent the emergence of new obstacles to trade within the single market, and to reduce discrepancies between national laws by creating the conditions for their convergence. The Notification Directive (Directive 83/189/EEC codified by Directive 98/34/EC ([1998] OJ L204/37), as amended by Directive 98/48/EC ([1998] OJ L217/ 18)) was the first instrument to adopt this approach. It plays a fundamental role in the management of the internal market by preventing the adoption of national technical regulations and standards setting up new trade barriers. This is achieved through a mechanism of transparency and mutual exchange of information, whereby the Member States inform each other and the Commission of any proposed technical legislation, with the view to eliminating at source any new potential barriers to trade. According to the 2011 Commission Report, The Operation of Directive 98/34/EC in 2009 and 2010 (COM(2011) 853 final), [t]he information procedure has brought transparency to standards at national and thus also European level and has encouraged National Standards Bodies (NSBs) to continue to take initiatives at European level, in turn promoting European harmonisation. …

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… [T]he notification to the Commission of national technical regulations prior to their adoption has proved to be an effective instrument of prevention of barriers to trade and of cooperation between the Commission and the Member States and among the Member States themselves as well as improving the regulatory framework. (at 3) The second main instrument was the early warning and rapid intervention system created under Council Regulation (EC) No 2679/98 on the functioning of the internal market in relation to the free movement of goods among the Member States ([1998] OJ L337/8). Under this information and monitoring mechanism, the Member States must inform the European Commission of any major obstacles to trade that might seriously disrupt the free movement of goods and/or cause individuals serious loss, such as border blockades (Case C-265/95 Commission v France (Re Spanish Strawberries) [1997] ECR I-6959: blockades and destruction of lorry-loads by French farmers protesting against the import of fruit and vegetables from Spain), or demonstrations (Case C-112/00 Eugen Schmidberger, Internationale Transporte und Planzüge v Austria [2003] ECR I-5659: political demonstrations by environmentalists leading to the closure of major routes) or even road works concerning important routes. Regulation 2679/98 was supplemented by the ‘New Legislative Framework’ for the marketing of products, the purpose of which is to improve and strengthen the working of the internal market for goods and the placing of industrial products in this market. This Framework, comprising two Regulations and one Decision, was adopted on 9 July 2008: • Regulation (EC) No 764/2008 laying down procedures relating to the application of certain national technical rules to products lawfully marketed in another Member State ([2008] OJ L218/21). This Regulation aims to improve the application of the principle of mutual recognition by laying down, in nonharmonised sectors, rules and procedures that authorities of Member States must follow when they take or intend to take measures that could hinder the free movement of goods lawfully marketed in another Member State. • Regulation (EC) No 765/2008 setting out the requirements for accreditation and market surveillance relating to the marketing of products ([2008] OJ L218/30). This Regulation organises market surveillance, which ensures that products placed on the market do not put at risk the health and safety of consumers and workers or any public interest, and that any measures are taken to stop the marketing of products that do not comply with EU harmonisation legislation requirements. In accordance with the principle of subsidiarity (see 2.4), while the requirements for market surveillance are set out in the Regulation, its organisation and practice are carried out at national level. Following a re-evaluation of this Regulation by the Commission in its communication entitled ‘The Goods Package: Reinforcing trust in the single market’ (COM(2017) 787 final, 19 December 2017 at 6 – see 11.2.3), it was amended by Regulation (EU) 2019/1020 of the European Parliament and of the Council of 20 June 2019 on market surveillance and compliance of products and amending Directive 2004/42/EC and Regulations (EC) No 765/2008 and (EU) No 305/2011 ([2019] OJ L169/1). Applicable from 16 July 2021 (except for Articles 29, 30, 31, 32, 33 and 36 which are applicable from 1 January 2021), this Regulation aims to improve market surveillance and compliance with product regulations and ‘provides a framework for controls on products entering the Union market’

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(Article 1) and applies to all products subject to EU harmonised Regulations indicated in Annex I (Article 2). It sets out the following requirements: (a) Under Article 4, an economic operator in the EU (ie a manufacturer, an importer, an authorised representative or a fulfilment service provider established in the EU) must: (i) ensure the availability of the conformity documentation; (ii) inform authorities when they have reasons to believe that a product presents a risk; and (iii) cooperate with market surveillance authorities. (b) Products offered for sale online or through other means of distance sales are subject to surveillance when the offers target end users, ie the economic operator directs by any means its activities to a Member State market (Article 6). (c) Market surveillance is strengthened by: (i) granting greater powers to market surveillance national authorities; (ii) harmonising the tasks and powers of market surveillance, such as taking samples and imposing penalties; (iii) enabling market surveillance authorities to reclaim all cost of their activities in case of non-compliant products; (iv) harmonising the approach for surveillance at EU borders by customs and surveillance authorities; and (v) setting up a Union Product Compliance Network (UPCN) by 1 January 2021. • Decision No 768/2008/EC on a common framework for the marketing of products ([2008] OJ L218/82). This Decision sets out common conformity assessment procedures, whereby products undergo testing, inspection and certification to ensure that they meet the requirements of applicable European technical harmonisation legislation. Combined with the Regulation on market surveillance, the Decision forms an overall and consistent framework for the marketing of products. While the preventive approach has made undeniable progress, it is unlikely to replace or even marginalise the prohibitive approach, since Member States are always tempted to introduce new, disguised, indirect obstacles to trade. The prohibitive, repressive approach seems to remain the most efficient instrument against all attempts at protectionism.

13.2 The prohibition of physical and technical barriers The previous chapter examined financial charges imposed by Member States. This section considers non-financial restrictions imposed by a Member State, ie national rules that impose administrative hurdles that may ultimately cost money to ensure compliance with such administrative practices, without involving any form of payment of dues. Under Article 34 TFEU: Quantitative restrictions on imports and all measures having equivalent effect shall be prohibited between Member States. And under Article 35 TFEU:

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Quantitative restrictions on exports, and all measures having equivalent effect, shall be prohibited between Member States. Both provisions have been held to be directly applicable and to have vertical direct effect (Case 74/76 Iannelli & Volpi SpA v Ditta Paolo Meroni [1977] ECR 557, para 13; Case 83/78 Pigs Marketing Board v Raymond Redmond [1978] ECR 2347, para 66).

13.2.1 Measures caught under Articles 34 and 35 TFEU By definition, Articles 34 and 35 TFEU are directed at Member States, and therefore cover primarily national measures that are taken by central or local authorities (see 13.2.1.1). This means that measures taken by private individuals or purely internal ones are, in principle, not covered by those provisions (see 13.2.1.2). Furthermore, although one would assume that Articles 34 and 35 would not apply to EU measures, the Court has ruled to the contrary (see 13.2.1.3). 13.2.1.1

National measures All measures of Member States are subject to Articles 34 and 35 TFEU. These include not only legally binding measures of central public authorities (Acts of Parliament and secondary legislation), but also measures by local authorities as well as administrative practices (see Case C-41/02 Commission v The Netherlands [2004] ECR I-11375: consistent policy of the Dutch Health Minister on granting derogations from the legal prohibition on the marketing of foodstuff fortified with micronutrients). Articles 34 and 35 apply also to rules of State-sponsored bodies or of private bodies exercising public powers. In 1978 the Irish Goods Council, a private company, launched the ‘Buy Irish Campaign’ to promote goods made in Ireland. The Commission brought an enforcement action against Ireland (Case 249/81 Commission v Ireland (Re Buy Irish Campaign) [1982] ECR 4005) for breach of the former Article 30 TEEC (now Article 34 TFEU). The Irish Government raised three potential defences: • The ‘Buy Irish Campaign’ was created by the Irish Goods Council as a private company, and as such was not subject to the free movement of goods provisions. • The ‘Buy Irish Campaign’ was not legally binding on the Irish public as it was not law (the Irish Goods Council could not force the Irish public to buy Irish goods, nor deter them from buying imported goods). • The ‘Buy Irish Campaign’ had clearly failed, as the evidence produced by the Irish Government showed that the Irish consumers had bought more imported goods following the campaign. The Court of Justice rejected all arguments. The Irish Goods Council was to be treated as part of the Irish Government as a State-sponsored body: It is … apparent that the Irish Government appoints the members of the Management Committee of the Irish Goods Council, grants it public subsidies which cover the greater part of its expenses and, finally, defines the aims and the broad outline of the campaign conducted by that institution to promote the sale and purchase of Irish products. In the circumstances the Irish Government cannot rely on the fact that the campaign was conducted by a private company in order to escape any liability it may have under the provisions of the Treaty. …

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… [T]he campaign cannot be likened to advertising by private or public undertakings, or by a group of undertakings, to encourage people to buy goods produced by those undertakings. Regardless of the means used to implement it, the campaign is a reflection of the Irish Government’s considered intention to substitute domestic products for imported products on the Irish market and thereby to check the flow of imports from other Member States. (paras 15 and 23) The campaign was capable of hindering the pattern of trade between Member States, as it was capable of influencing trade and therefore of frustrating the aims of the free movement of goods: Such a practice cannot escape the prohibition laid down by Article [34] of the Treaty solely because it is not based on decisions which are binding upon undertakings. Even measures adopted by the government of a Member State which do not have binding effect may be capable of influencing the conduct of traders and consumers in that State and thus of frustrating the aims of the [EU] … (para 28) In a later decision, Case 222/82 Apple and Pear Development Council v KJ Lewis Ltd [1983] ECR 4083, the Court had to examine whether the promotion of the consumption of apples and pears by a series of advertisements – featuring typically English varieties, such as Cox’s Orange Pippin apples and Conference pears – by the Apple and Pear Development Council (APDC), a semi-public body, could be regarded as national measures subject to Article 34 TFEU. The Court observed that … a publicity campaign to promote the sale and purchase of domestic products may, in certain circumstances, fall within the prohibition contained in Article [34] of the Treaty, if the campaign is supported by the public authorities. In fact, a body such as the Development Council, which is set up by the government of a Member State and is financed by a charge imposed on growers, cannot under [EU] law enjoy the same freedom as regards the methods of advertising used as that enjoyed by producers themselves or producers’ associations of a voluntary character. (para 17) Rules adopted by a professional body within a Member State can also constitute a ‘measure’ subject to Article 34 if the rules are capable of affecting trade between the Member States. In Joined Cases 266 and 267/87 The Queen v Royal Pharmaceutical Society of Great Britain [1989] ECR 1295, the Court ruled that to decide if a particular professional body has sufficient authority to establish measures that could fall foul of Article 34, the Court will consider the: (a) legal status of the professional body; (b) requirements of mandatory membership by relevant professionals; (c) power to enact rules of ethics; (d) existence of disciplinary powers; and (e) sanctions that the professional body can invoke if members break the rules (paras 14–16). In Case C-171/11 Fra.bo SpA v Deutsche Vereinigung des Gas- und Wasserfaches eV (DVGW) – Technisch-Wissenschaftlicher Verein EU:C:2012:453, the question was raised as to whether a non-profit body governed by private law, which set technical standards for products used in the drinking water supply sector in order to certify products in compliance with those standards, had to comply with Article 34 TFEU ‘where the national legislation considers the products certified by that body to be

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compliant with national law and that has the effect of restricting the marketing of products which are not certified by that body’ (para 32). The Court ruled in the affirmative. Even measures or actions taken by non-State bodies or individuals, which might hinder the free movement of goods, could fall foul of Article 34 TFEU, should the State fail to take steps to prevent them. In Re Spanish Strawberries (13.1 above), in which French farmers prevented imports of Spanish strawberries into France by blockading roads and intercepting lorries and destroying their loads, the Commission brought an action against the French Government on the ground that it should have taken steps to prevent such acts by the French farmers. The Court of Justice agreed with the Commission, and notably ruled that, [a]s an indispensable instrument for the realization of a market without internal frontiers, Article [34] therefore does not prohibit solely measures emanating from the State which, in themselves, create restrictions on trade between Member States. It also applies where a Member State abstains from adopting the measures required in order to deal with obstacles to the free movement of goods which are not caused by the State. (para 30) Given the fundamental nature of Article 34 TFEU, and in view of Article 4(3) TEU, which requires Member States to ‘take all necessary and appropriate measures’ to ensure that, notably, the EU’s fundamental freedoms are respected (principle of sincere cooperation, see 2.3.2), Member States are required to take positive action to prevent their own nationals from acting in a way that is incompatible with the EU Treaty (see Re Spanish Strawberries, para 32). In contrast, Austria was not found guilty of a breach of Article 34 TFEU when it authorised a demonstration against pollution along the Brenner pass, which blocked traffic on that transit route (Schmidberger). 13.2.1.2

‘Purely internal measures’ The Treaty provisions on free movement of goods naturally imply that the national measure affects cross-frontier movement between Member States. Consequently, a measure that affects trade within a single State only, with no cross-border element, will be deemed to be a purely internal measure and will not be subject to Articles 34 or 35 TFEU. In Case 286/81 Criminal proceedings against Oosthoek’s Uitgeversmaatschappij BV [1982] ECR 4575, the Court observed, in the context of a Dutch law prohibiting the offering of free books to purchasers of an encyclopaedia for sales promotion purposes, that … it must be stated that the application of the Netherlands legislation to the sale in the Netherlands of encyclopaedias produced in that country is in no way linked to the importation or exportation of goods and does not therefore fall within the scope of [Article 34 and Article 35 TFEU]. However, the sale in the Netherlands of encyclopaedias produced in Belgium and the sale in other Member States of encyclopaedias produced in the Netherlands are transactions forming part of intra-[EU] trade. … [I]t is therefore necessary to determine whether provisions of the type contained in the Netherlands legislation are compatible with both [Article 34 and Article 35 TFEU]. (para 9) It appears from the case law of the Court that the scope of purely internal measures is increasingly shrinking. Joined Cases C-321/94 Criminal proceedings against Pistre

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Michèle, C-322/94 Barthes, C-323/94 Milhau and C-324/94 Oberti [1997] ECR I-2343 provide a good illustration of this tendency. Here, the Court held that a French law preventing the use of indications of ‘mountain’ provenance for agricultural products and foodstuffs without prior administrative authorisation was to be regarded as a measure having equivalent effect (MHEE) to a quantitative restriction (see 13.2.3 below), on the ground that … whilst the application of a national measure having no actual link to the importation of goods does not fall within the ambit of Article [34] of the Treaty … Article [34] cannot be considered inapplicable simply because all the facts of the specific case before the national court are confined to a single Member State. (para 44) Similarly, in Case C-448/98 Criminal proceedings against Guimont [2000] ECR I-1663, the Court rejected the argument of the French Government that former Article 30 TEC (now Article 34 TFEU) did not apply to the French Decree reserving the designation ‘Emmenthal’ for cheeses with ‘a hard, dry rind, of a colour between golden yellow and light brown’, which Mr Guimont was accused of infringing, since the Decree did not, in practice, apply to imported products and it ‘was designed to create obligations solely for national producers and [did] not therefore concern intra-[EU] trade in any way’ (para 14). First, the Court observed that former Article 30 TEC was not designed to ensure that goods of national origin enjoy the same treatment as imported goods in every case, and a difference in treatment as between goods which is not capable of restricting imports or of prejudicing the marketing of imported goods does not fall within the prohibition contained in that article. (para 15) Then, it held that the mere fact that the French law, which was applicable without distinction to both French and imported products, did not apply to imported products in practice, did ‘not exclude the possibility of it having effects which indirectly or potentially hinder intra-[EU] trade’ (paras 16 and 17). 13.2.1.3

EU measures The Court was also asked to analyse whether EU measures could potentially be MHEEs (see further 13.2.3 below). Generally, especially in relation to EU rules relating to the common organisation of markets or limiting the production or marketing of certain agricultural products, the Court would answer in the negative, as in Case 15/83 Denkavit Nederland BV [1984] ECR 2171, paras 16–17. Yet, the principle that ‘[t]he prohibition of quantitative restrictions and of all measures having equivalent effect applies not only to national measures but also to measures adopted by the [EU] institutions’ was reiterated by the Court (see Denkavit, para 15, as confirmed in Case C-51/93 Meyhui NV v Schott Zwiesel Glaswerke AG [1994] ECR I-3879, para 11, and Case C-114/96 Kieffer and Thill [1997] ECR I-3629, para 27). Along those lines, in Case C-47/90 Établissements Delhaize frères and Compagnie Le Lion SA [1992] ECR I-3669, para 26 and Case C-315/92 Verband Sozialer Wettbewerb eV v Clinique Laboratoires SNC and Estée Lauder Cosmetics GmbH [1994] ECR I-317, para 12, the Court confirmed that ‘all [EU] secondary legislation, [must] be interpreted in the light of the Treaty rules on the free movement of goods’. As a result, provided they satisfy the proportionality test, EU measures may equally be justified under Article 36 TFEU (see

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14.2.1), as in Case C-210/03 R (Swedish Match AB and Swedish Match UK Ltd) v Secretary of State for Health [2004] ECR I-11893 in which the Court ruled that [w]hile the prohibition of marketing tobacco products for oral use under Article 8 of Directive 2001/37 constitutes one of the restrictions referred to in Articles [34 and 35 TFEU], it is nevertheless justified … on grounds of the protection of human health. It cannot therefore, in any event, be regarded as having been adopted in breach of the provisions of Articles [34 and 35 TFEU]. (para 61) Type of measures caught under Articles 34 and 35 TFEU National measures

Measures adopted by EU institutions

Measures issued by public authorities C-41/02 Commission v The Netherlands 21/84 Commission v France (Re Postal Franking Machines) Failure by national authorities to take action C-265/95 Commission v France (Re Spanish Strawberries) Measures take by State-sponsored or private bodies with public powers 249/81 Commission v Ireland (Re Buy Irish Campaign) 222/82 APDC v Lewis

The prohibition of QRs and MHEEs applies to EU measures 15/83 Denkavit Nederland BV Interpretation of EU secondary legislation in light of FMG provisions C-47/90 Etablissement Delhaize Frères C-315/92 Clinique Laboratoires SNC and Estée Lauder Justification of EU measures under Article 36 TFEU C-201/03 Swedish Match AB QR = quantitative restrictions MHEE = measure having equivalent effect FMG = free movement of goods

Figure 13.1 Type of measures caught under Articles 34 and 35 TFEU

13.2.2 Quantitative restrictions Quantitative restrictions were classically defined by the Court in Case 2/73 Geddo v Ente Nazionale Risi [1973] ECR 865, as ‘measures which amount to a total or partial restraint of, according to the circumstances, imports, exports or goods in transit’ (at 879). These are quotas artificially imposed by a Member State to restrict by value or quantity the import of certain products into that Member State. As such, a total ban on imports is regarded as a quantitative restriction, as in Case 34/79 R v Henn and Darby [1979] ECR 3795. In this case, Henn and Darby were prosecuted in the UK for importing certain pornographic material, contrary to a UK law imposing a complete ban on the importation of such items. The defendants claimed that the UK law was unlawful as it hindered trade between Member States and constituted a MHEE under former Article 30 TEEC (now Article 34 TFEU). Contrary to the interpretation of the Court of Appeal, which did not hold a ban to be the same as a quantitative restriction, the Court of Justice ruled that [i]t is clear that [Article 34] includes a prohibition on imports inasmuch as this is the most extreme form of restriction. The expression used in Article [34] must

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therefore be understood as being the equivalent of the expression ‘prohibitions or restrictions on imports’ occurring in Article 36. … [T]herefore … a law such as that referred to in this case constitutes a quantitative restriction on imports within the meaning of Article [34] of the Treaty. (paras 12 and 13)

13.2.3 Measures having equivalent effect to quantitative restrictions on imports Like the notion of charges having equivalent effect (see 12.4.2), the notion of measures having equivalent effect (MHEE) is not defined in the Treaty. Therefore, the Commission and the Court of Justice were able to shape this concept into an efficient means of limiting the impact of new national protectionist measures that arose at the end of the transitional period in 1970, when all customs duties and quantitative restrictions had been abolished. The Commission was first to attempt to define a ‘measure having equivalent effect’ in Directive 70/50 of 22 December 1969 ([1971] OJ L013/29). This Directive was designed to act as guidance at the end of the transitional period. While it no longer has legal effect, it still offers good examples of such measures, and notably distinguishes between two categories: (a) Article 2 provides a non-exhaustive list of measures that apply exclusively to, and have adverse effects on, imports or favour domestic products. These are therefore directly discriminatory (distinctly applicable measures). These include measures which, for example, impose maximum or minimum prices on imports, or subject imported products only to conditions relating to shape, size, weight, composition, presentation, or identification, or ‘subject imported products to conditions which are different from those for domestic products and more difficult to satisfy’, etc. (b) Article 3 refers to … measures governing 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 of such measures on the free movement of goods exceeds the effects intrinsic to trade rules. These are indistinctly or equally applicable measures. 13.2.3.1

The Dassonville formula The Court of Justice went one step further by offering a wide and holistic definition of ‘measures having equivalent effect’. In Case 8/74 Procureur du Roi v Dassonville and Dassonville [1974] ECR 837, the Court was asked to examine the compatibility with former Article 30 TEEC of a Belgian law that required importers of Scotch whisky to produce certificates of origin demonstrating that the whisky was effectively produced in Scotland. Dassonville purchased Scotch whisky in France, but was unable to produce a certificate of origin from the seller. Consequently, he was prosecuted in Belgium for not having a certificate. His defence was that the Belgian measure was a MHEE contrary to Article 30 TEEC (now Article 34 TFEU). The Court ruled that the requirement by a Member State of a certificate of authenticity which is less easily obtainable by importers of an authentic product which has been put into free circulation in a regular manner in another Member State than by importers of the same product coming directly from the country of origin constitutes a

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measure having an effect equivalent to a quantitative restriction as prohibited by the Treaty. (para 9) But, more importantly, it produced the following definition, known as the ‘Dassonville formula’: All trading rules enacted by Member States which are capable of hindering, directly or indirectly, actually or potentially, intra-[EU] trade are to be considered as measures having an effect equivalent to quantitative restrictions. (para 5) The crucial element of this definition is the possible effect of a national measure on trade between the Member States. There is no need to show an intent to discriminate on the part of the Member State, or, indeed, actual hindrance of trade. Consequently, the de minimis rule used in competition law (see 17.2.2.2), that is the degree to which trade is affected, is not used by the Court to assess the effect on trade of national measures (Joined Cases 177 and 178/82 Criminal proceedings against van de Haar and Kaveka de Meern BV [1984] ECR 1797, para 13). Unlike the Commission, the Court of Justice does not make express the distinction between distinctly and indistinctly applicable measures: both are caught by the Dassonville formula. However, the Court has been more strict in its application of Article 34 TFEU, catching a wider range of national measures than the Commission had suggested in Directive 70/50, particularly in respect of indistinctly applicable measures as defined in Article 3 of the Directive (see 13.2.3 above). 13.2.3.2

The Cassis de Dijon approach Following Member States’ complaints about its approach, the Court retreated slightly from the broad definition of a MHEE in the Dassonville formula by developing a new approach in the Cassis de Dijon case (Case 120/78 Rewe-Zentral AG v Bundesmonopolverwaltung für Branntwein [1979] ECR 649). There, the Court applied the Dassonville formula but laid down two principles to help regulate its application: (a) the rule of reason (first principle) (see 14.3.1); and (b) the principle of mutual recognition or equivalence (second principle) (see below). The ruling In Cassis de Dijon, a German law, the Branntweinmonopolgesetz, set a minimum alcohol level of 32% for certain spirits, whether domestic or imported – therefore an indistinctly applicable measure – including for Cassis de Dijon, a French blackcurrant liqueur the alcohol content of which was only 15–20%. Consequently, Cassis de Dijon was prevented from being imported into Germany, since it did not satisfy the German rules. On a preliminary reference from the Hesse Finance Court, the Court ruled: It is clear from the foregoing that the requirements relating to the minimum alcohol content of alcoholic beverages do not serve a purpose which is in the general interest and such as to take precedence over the requirements of the free movement of goods, which constitutes one of the fundamental rules of the [Union]. In practice, the principle [sic] effect of requirements of this nature is to promote alcoholic beverages having a high alcohol content by excluding from the national market products of other Member States which do not answer that description. It therefore appears that the unilateral requirement imposed by the rules of a Member State of a minimum alcohol content for the purposes of the sale of

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alcoholic beverages constitutes an obstacle to trade which is incompatible with the provisions of Article [34] of the Treaty. There is therefore no reason why, provided that they have been lawfully produced and marketed in one of the Member States, alcoholic beverages should not be introduced into any other Member State … (para 14) Consequently, the Court ruled that the concept of ‘measures having an effect equivalent to quantitative restrictions on imports’ contained in Article [34] of the Treaty is to be understood to mean that the fixing of a minimum alcohol content for alcoholic beverages intended for human consumption by the legislation of a Member State also falls within the prohibition laid down in that provision where the importation of alcoholic beverages lawfully produced and marketed in another Member State is concerned. (para 15) The principle of mutual recognition or equivalence In this landmark case of Cassis de Dijon, the Court rejected the German Government’s argument that obstacles to trade had been reduced by recourse to the procedure for the harmonisation of national standards on the manufacture and marketing of goods as they directly affected the establishment and functioning of the then common market. Until such standards had been harmonised, former Article 30 TEEC (now Article 34 TFEU) was to be applied only in so far as those provisions led to discrimination against imported goods in relation to domestic goods. The German Government further argued that [m]easures which are applicable without distinction to domestic products and imported products [did] not, according to Directive No 70/50, have effects equivalent to those of quantitative restrictions and [did] not therefore, in principle, fall within the scope of Article [34]. (at 655) Laying down the principle of equivalence or mutual recognition, the Court explained that such a national rule cannot be relied upon in order to prohibit in a general manner the import and marketing of products that have been ‘lawfully produced and marketed’ in other Member States. Far from being an issue of intrinsic validity of the national rule, it is rather one of reliance on the rule to prevent the marketing of imported goods. As a result, as the Commission explained in its Communication concerning the consequences of the judgment given by the Court of Justice on 20 February 1979 in Case 120/78 (‘Cassis de Dijon’) ([1980] OJ C256/2): Any product imported from another Member State must in principle be admitted to the territory of the importing Member State if it has been lawfully produced, that is, conforms to rules and processes of manufacture that are customarily and traditionally accepted in the exporting country, and is marketed in the territory of the latter. This principle implies that Member States, when drawing up commercial or technical rules liable to affect the free movement of goods, may not take an exclusively national viewpoint and take account only of requirements confined to domestic products. The proper functioning of the [single] market demands that each Member State also give consideration to the legitimate requirements of the other Member States. (at 2)

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The principle of mutual recognition is still applicable in the absence of common rules relating to the production and marketing of goods (see 11.3). That being said, the national rule might be justified under Article 36 TFEU (see 14.2.1), or on the ground of any of the ‘imperative requirements’ mentioned in para 8 of this judgment, namely effectiveness of fiscal supervision, the protection of public health, the fairness of commercial transactions and the defence of the consumer (see 14.3.1). The economic significance of Cassis de Dijon If the overall aim of economic integration is to be achieved, it is the consumers and not the national laws that will decide which goods will sell and which will not. It is possible that consumers in a Member State will stick with their domestic products, but if national producers are to maintain their market share, it must be because of the quality of the goods and their ability to persuade consumers that their products are best, not through taking advantage of the protectionist national laws of their Member State. From Cassis de Dijon, the Court of Justice clearly has tried to empower consumers. This is particularly well illustrated in the German Re Law of Purity of Beer case (see 13.2.3.3 and 14.3.1.2), in which the 1516 Reinheitsgebot (the regulation concerning the production of beer in Germany) could not be relied upon to prohibit the marketing of imported beer in Germany. Yet this ruling did not have the effect of preventing German breweries from producing and marketing their beers according to the Reinheitsgebot. As a result, German consumers have now a wider choice, and can still enjoy a German lager as well as Scottish or Belgian ale, or English bitter or stout. 13.2.3.3

Examples of measures having equivalent effect Distinctly applicable measures Measures imposing conditions on imported goods only The issue of new or old car registrations provides an abundance of cases concerning the question of national supplementary and excessive requirements being imposed on cars imported from other Member States. For instance, in Case C-524/07 Commission v Austria [2008] ECR I-187, the Court found that an Austrian law requiring used motor vehicles previously registered in and imported from other Member States to comply with stricter technical requirements, with regard to exhaust emissions and noise pollution in compliance with Directive 93/59/EEC ([1993] OJ L186/21), at the time of registration in Austria, was a MHEE, because vehicles having the same characteristics and which were already authorised for use on the roads in Austria were not subject to the same requirements in the case of their re-registration. Import licences In Joined Cases 51–54/71 International Fruit Company NV v Produktschap voor groenten en fruit [1971] ECR 1107, national provisions requiring import or export licences, even if granted automatically or as a formality, or any other similar procedure, were deemed to be MHEEs by their very nature. Similarly, in Case C-170/04 Rosengren and others v Riksåklagaren [2007] ECR I4071, a Swedish law on alcohol provided that the wholesale import of alcohol could be undertaken only by persons who were approved warehouse keepers or registered recipients of alcoholic goods, and that such goods could be imported into Sweden only by authorised persons. Rosengren and others ordered cases of bottles of wine from Spain, directly by correspondence and without declaring them to the Swedish customs

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authorities. The bottles were confiscated on the ground that they had been unlawfully imported in breach of the law on alcohol. The Court found that the provisions of the Alkohollagen, under which private individuals were prohibited from importing alcoholic beverages, amounted to a quantitative restriction on imports under former Article 28 TEC (now Article 34 TFEU) and could not be justified under former Article 30 TEC (now Article 36 TFEU). Inspections A large number of MHEEs can be found in the numerous cases dealing with unjustified, unilaterally imposed veterinary, sanitary and technical inspections. Where there is no, or incomplete, European harmonising legislation, Member States have some discretion to require that imported products be inspected, provided that such additional inspections or controls do not impose any additional burden on imported goods (see Case C-14/02 ATRAL SA v Belgium [2003] ECR I-4431). For instance, in Case 251/78 Firma Denkavit Futtermittel GmbH v Minister für Ernährung, Landwirtschaft und Forsten des Landes Nordrhein-Westfalen [1979] ECR 3369, a trader, who imported feeding-stuffs containing products of animal origin into Germany from the Netherlands, questioned the compatibility with former Article 30 TEEC (now Article 34 TFEU) of a 1957 regional regulation from the Land of North Rhine-Westphalia on animal health measures applicable on the importation and transit of feeding-stuffs containing products of animal origin from abroad. Under the regulation concerned, the feeding-stuffs could only be imported if two conditions were fulfilled: (a) that a certificate from the competent authorities in the exporting country was produced, confirming that the goods had undergone a heating process during or after dehydration in order to destroy Salmonellae which might have been present and; (b) that the feeding-stuffs had to be subject upon importation to a preliminary inspection, in the form of samples taken for inspection purposes by veterinary experts and examined in an official veterinary inspection institute in Germany, after which their importation would only be possible once it had been established by bacteriological analysis that the goods were free from Salmonellae. The Court of Justice ruled that the German regional regulation fell within the prohibition of former Article 30 TEEC (now Article 34 TFEU) unless justified under former Article 36 TEEC (now Article 36 TFEU). More recently, in Case C-170/07 Commission of the European Communities v Republic of Poland [2008] ECR I-87, Polish legislation requiring imported secondhand vehicles to undergo a roadworthiness test prior to their registration, whereas domestic vehicles with the same characteristics were not subject to such a requirement, was deemed to be in breach of former Article 28 TEC (now Article 34 TFEU). Measures favouring or promoting domestic products Campaigns promoting domestic goods over imports Any advantage given exclusively to domestic products will fall foul of Article 34 TFEU. The Court will regard as unlawful any form of indirect State aid, such as advertising campaigns promoting or favouring domestic products. For instance, in the Buy Irish Campaign case (above 13.2.1.1), the campaign had the potential to give Irish goods a preference over imported goods. Through this campaign, the Irish Government sought to promote Irish goods and to achieve a 3%

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switch in customer spending from imports to Irish products. A number of means were adopted for that purpose: (a) an information service, indicating to consumers which products were made in Ireland and where they could be obtained; (b) exhibition facilities for Irish goods; (c) encouragement of the use of a ‘Buy Irish’ symbol for goods made in Ireland; and (d) the organisation of a publicity campaign by the Irish Goods Council. Following intervention by the Commission, only the first two measures were dropped. In an enforcement ruling, the Court observed that the Irish Government, which appointed the members of the Irish Goods Council and were its main founders, was thus responsible for the Council’s activities, even though they were run by a private body, and that ‘[t]he advertising campaign to encourage the sale and purchase of Irish products cannot be divorced from its origin as part of the government programme’ (para 26). Consequently, the third and fourth activities listed above amount[ed] to the establishment of a national practice, introduced by the Irish Government and prosecuted with its assistance, the potential effect of which on imports from other Member States is comparable to that resulting from government measures of a binding nature. (para 28) And [s]uch a practice cannot escape the prohibition laid down by Article [34] of the Treaty solely because it is not based on decisions which are binding upon undertakings. Even measures adopted by the government of a Member State which do not have binding effect may be capable of influencing the conduct of traders and consumers in that State and thus of frustrating the aims of the [EU]. (para 29) A similar situation occurred in the UK in the Apple and Pear Development Council case (see 13.2.1.1), in which the Council, a professional body vested with statutory powers, engaged in an advertising campaign, including the slogan ‘Polish up your English’, intended to encourage consumers to purchase domestically grown apples and pears. Following the Buy Irish Campaign case, the Court confirmed that ‘a publicity campaign to promote the sale and purchase of domestic products may, in certain circumstances, fall within the prohibition contained in Article [34] of the Treaty, if the campaign is supported by the public authorities’ (para 17). As the Council was a semipublic body set up by the British Government, and was financed by a charge imposed on growers, it could not ‘under [EU] law enjoy the same freedom as regards the methods of advertising used as that enjoyed by producers themselves or producers’ associations of a voluntary character’ (para 17). As a result, such a body is under a duty not to engage in any advertising intended to discourage the purchase of products of other Member States or to disparage those products in the eyes of consumers. Nor must it advise consumers to purchase domestic products solely by reason of their national origin. (para 18) However, the Council could draw attention, in its publicity, to specific qualities of domestic fruit, or organise campaigns to promote the sale of certain varieties, mentioning their particular properties (eg apples being ‘crisp’ or ‘crunchy’), even if these varieties were typically national products. Therefore, by contrast with the Buy Irish Campaign case, a Member State is not prohibited from running a campaign based on the quality of the goods concerned,

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even though the qualities promoted by the campaign are those that are primarily found in domestic (rather than imported) goods, provided that predominance is given to quality and not origin. To prefer domestic goods over imported goods solely on the grounds of origin would be a breach of Article 34 TFEU. Measures making imports more costly or more difficult Any national measure imposing on imported products conditions that are not imposed on domestic ones would have the effect of increasing the cost of the former or hindering their market access, thus putting them at a commercial disadvantage. In Case 113/80 Commission v Ireland (Re Irish Souvenirs) [1981] ECR 1625, ‘Irish’ souvenirs produced outside of Ireland had to be marked ‘foreign’, or with the country of their origin, whereas souvenirs produced in Ireland did not have to be marked in this way. The Commission brought an enforcement action claiming breach of former Article 30 TEEC (now Article 34 TFEU). The Irish Government did not dispute that the measure was in breach of the free movement of goods provision, but it argued that it was justified, notably, to protect consumers under the first Cassis de Dijon principle (see 14.3.1). The Court disagreed, and concluded that it was a MHEE. Public procurement measures or contracts designed to favour domestic firms In Case 72/83 Campus Oil Limited and others v Minister for Industry and Energy and others [1984] ECR 2727, Irish rules imposing an obligation on importers of petroleum products to purchase a certain proportion of their supply at prices fixed by the competent minister from a State-owned company that operated a refinery in Ireland, were regarded as incompatible with former Article 30 TEEC (now Article 34 TFEU). Similarly, in Case C-398/98 Commission v Greece [2001] ECR I-7915, a Greek system for stocks of petroleum products was found to be a MHEE. Under this system, companies marketing those products could only free themselves from the obligation to store them at their installations if they obtained supplies from refineries established in Greece, but could not do so if they bought their products from refineries situated in other Member States. The Court found that, by making their marketing more difficult, this system clearly discriminated against petroleum products from refineries established in other Member States. Administrative practices favouring domestic goods As pointed out in 13.2.1.1 above, the free movement provisions may be infringed by national administrative practices under the cloak of general legally binding rules. In Case 21/84 Commission v France (Re Postal Franking Machines) [1985] ECR 1356, a leading UK manufacturer claimed that the French postal administration repeatedly refused to approve its postal franking machines, even though they had been approved in a considerable number of other countries. On an action for enforcement, the Court of Justice ruled that the consistent and general administrative discrimination, consisting in delays in replying to applications for approval or refusing approval because of inaccurate alleged technical faults and without proper justification, was a breach of former Article 30 TEEC (now Article 34 TFEU). Failure to take adequate steps to prevent obstacles to the free movement of goods also constitutes a ‘manifest and persistent failure by the State’, as in Re Spanish Strawberries (see 13.1), in which acts of obstruction, vandalism and violence, such as the interception of lorries transporting fruit and vegetables originating in Spain, the destruction of their loads, violence towards the lorry drivers, threats to wholesalers and retailers, and the damaging of those goods on display, were perpetrated by French

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farmers. The Court ruled that such acts ‘unquestionably created obstacles to intra[EU] trade in those products’ (para 38) and that the French authorities had … manifestly and persistently abstained from adopting appropriate and adequate measures to put an end to the acts of vandalism which jeopardise the free movement on its territory of certain agricultural products originating in other Member States and to prevent the recurrence of such acts. (para 65) Indistinctly applicable measures Price restrictions In the 1970s and 1980s, it was quite common for Member States to try to regulate the sale price of goods. This was always viewed with suspicion by the European Commission, the theory being that the price of products should be determined by the economic operation of the market, rather than by Member State governments. Maximum selling price In Case 65/75 Tasca [1976] ECR 29, the Italian authorities prescribed a maximum selling price for refined sugar. While the Court of Justice did not view a maximum selling price applicable to domestic and imported products as constituting a MHEE in itself, it ruled that … it may have such an effect, however, when it is fixed at a level such that the sale of imported products becomes, if not impossible, more difficult than that of domestic products. A maximum price, in any event in so far as it applies to imported products, constitutes therefore a measure having an effect equivalent to a quantitative restriction, especially when it is fixed at such a low level that, having regard to the general situation of imported products compared to that of domestic products, dealers wishing to import the product in question into the Member State concerned can do so only at a loss. (para 13) Since imported sugar was more expensive than Italian processed sugar, and importers had to reduce their profit margin or even sell at a loss in order to meet the Member State maximum price, the Italian rule had the potential to make imports more costly and therefore more difficult. Minimum selling price Artificially keeping prices high is inherently bad as it hinders the free movement of goods and prevents effective competition which should drive down prices. In Case 82/77 Openbaar Ministerie of the Netherlands v van Tiggele [1978] ECR 25, in which the Dutch authorities prescribed, under a 1975 regulation concerning the price of spirits, a minimum selling price for gin, the ECJ observed that ‘[w]hilst national price-control rules applicable without distinction to domestic products and imported products cannot in general produce such an effect they may do so in certain specific cases’ (para 13). This could be the case when … a national authority fixes prices or profit margins at such a level that imported products are placed at a disadvantage in relation to identical domestic products either because they cannot profitably be marketed in the conditions laid down or because the competitive advantage conferred by lower cost prices is cancelled out. (para 14) In the more recent Case C-333/14 Scotch Whisky Association and Others v Lord Advocate EU:C:2015:845, the Court found that the Alcohol (Minimum Pricing) (Scotland) Act 2012 designed to protect human life and health and providing for the imposition of a minimum price per unit of alcohol (MPU), calculated by the

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application of a formula that takes into account the strength and volume of alcohol in the product, and to be observed by any person holding a licence for the retail selling of alcoholic drinks in Scotland, was contrary to Article 34 TFEU. Indeed the Court observed that the fact that such legislation prevents the lower cost price of imported products being reflected in the selling price to the consumer means, by itself, that that legislation is capable of hindering the access to the United Kingdom market of alcoholic drinks that are lawfully marketed in Member States other than the United Kingdom of Great Britain and Northern Ireland, and constitutes therefore a measure having an effect equivalent to a quantitative restriction within the meaning of Article 34 TFEU. (para 32) The Court further stressed that this significant restriction of the market might be avoided by the introduction of a tax measure designed to increase the price of alcohol which would enable traders to retain the freedom to determine their selling prices and protect human health and life equally effectively (para 50). Maximum profit margin on retail sales A profit margin is the difference between the retailer’s sale price and the expense of buying the products for re-sale. In Case 78/ 82 Commission v Italy [1983] ECR 1955, the Court of Justice did not view an Italian measure prescribing a maximum profit margin of 8% on the retail sale of cigarettes as a MHEE per se, since maximum profit margins did not hinder trade between the Member States. The Italian rule did not affect … the freedom of producers to fix the retail prices of their products. Competition [could] be freely pursued in the essential field of retail prices. Foreign producers of tobacco products [were] free either to take advantage of more competitive production costs or to pass on higher production costs in their entirety. It [was] not contested that the uniform margin represent[ed] an adequate remuneration to tobacconists for the retailing of tobacco products, whether they [were] imported or domestic products. (para 17) Fixed prices National legislation imposing fixed sales prices can impede access to the market of the importing State for products from other Member States more than it impedes access for domestic products, thus having a greater impact on the imported goods. In Case C-148/15 Deutsche Parkinson Vereinigung eV v Zentrale zur Bekämpfung unlauteren Wettbewerbs eV EU:C:2016:776, the Court ruled that … a [German] system of fixed prices for the sale by pharmacies of prescriptiononly medicinal products for human use, constitutes a measure having equivalent effect to a quantitative restriction on imports … since that legislation has a greater impact on the sale of prescription-only medicinal products by pharmacies established in other Member States than on the sale of the same medicinal products by pharmacies established within the national territory. (para 24) Production and marketing restrictions National requirements affecting the characteristics of goods provide a wealth of examples of MHEEs. Indications of origin Case 207/83 Commission v United Kingdom [1985] ECR 1201 concerned a UK measure, requiring all clothing, whether imported or domestic, to be sold retail in the UK, to have a label indicating the country of origin. The UK Government claimed that the measure was necessary to protect consumers. Rejecting this defence, the Court of Justice ruled that the measure was designed to persuade

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British consumers to buy British clothing, and that it ‘enabled consumers to assert their nationalistic prejudices which they may have against foreign products’. Thus, … the origin-marking requirement not only makes the marketing in a Member State of goods produced in other Member States … more difficult; it also has the effect of slowing down economic interpenetration in the [EU] by handicapping the sale of goods produced as the result of a division of labour between Member States. (para 17) Production or manufacturing requirements The majority of cases involving indistinctly applicable measures concern the regulation of the specific characteristics of a product. A few examples of such cases will illustrate how Member States tend to use national standards in order to limit or prohibit the marketing of foreign products. Such standards might comprise a requirement that the product be manufactured and marketed in a particular form or shape. A typical example is Case 261/81 Walter Rau v de Smedt [1982] ECR 3961, which concerned a Belgian measure requiring that all margarine sold in Belgium – whether imported or domestic – be contained in cube boxes, allegedly to help prevent confusion with butter amongst consumers. The Court of Justice rejected the Belgian Government’s reliance on mandatory requirements (first Cassis de Dijon principle – see 14.3.1). Indeed, although the measure applied to both imported and domestic products, its effect on imported margarine was clearly disproportionate, as the objective of preventing confusion with butter (protection of consumers) could have been achieved in a less restrictive manner, eg by the use of adequate labelling. While domestic producers all produced and packaged their margarine in cube boxes, importers had to re-package their margarine, which imposed on importers a requirement to have a separate production line for cubed containers, thus making production more expensive and hindering imports and competition. Other requirements involve the content of a product. In Case 788/79 Gilli and Andres [1980] ECR 2071, importers of apple vinegar from Germany to Italy were prosecuted for fraud, because they had sold vinegar in Italy that was not made from the fermentation of wine as prescribed by Italian law. Such a requirement was deemed to be a MHEE. This was also the case as regards French legislation that restricted the use of the name ‘Edam’ to cheese with a fat content of 40%. In Case 286/86 Ministère public v Deserbais [1988] ECR 4907, Mr Deserbais, the director of a dairy product company, was prosecuted for importing from Germany and marketing in France Edam cheese with a fat content of 34.3%, in contravention of the French law. More interesting is Case 178/84 Commission v Germany (Re Law of Purity of Beer) [1987] ECR 1227. Under German rules (the Biersteuergesetz, the law on beer duty, which provides that bottom-fermented beers may be manufactured only from malted barley, hops, yeast and water), the marketing of imported beers that used different ingredients and manufacturing processes, under the designation ‘beer’, was prohibited. The same requirements also applied to the manufacture of top-fermented beer, but here the rules authorised the use of other malts, technically pure cane sugar, beet sugar or invert sugar, and glucose and colourants obtained from those sugars. Furthermore, imports into Germany of beers containing additives were absolutely prohibited under the 1974 Law on foodstuffs, tobacco products, cosmetics and other consumer goods. The Court ruled that … by prohibiting the marketing of beers lawfully manufactured and marketed in another Member State if they do not comply with Articles 9 and 10 of the

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Biersteuergesetz, the Federal Republic of Germany has failed to fulfil its obligations under Article [34 TFEU]. (para 54) 13.2.3.4

Marketing restrictions: chronicle of a jurisprudence foretold The Dassonville formula (see 13.2.3.1) was set out in the context of a national measure that imposed marketing restrictions. Such measures gave rise to many challenges in national courts, whether they concerned a ban on canvassing and selling at private places (Case 382/87 R Buet and Educational Business Services (EBS) v Ministère public [1989] ECR 1235), a German rule prohibiting the transport and delivery of bread to consumers and retailers at night (Case 155/80 Oebel [1981] ECR 1993), a Belgian ban on storing and selling spirits in premises open to the public (Case 75/81 Blesgen v Belgium [1982] ECR 1211), a Dutch law that allowed tax collectors to seize goods if purchasers failed to discharge their tax debts, even if those goods belonged to a supplier in another Member State (Case C-69/88 H Krantz GmbH & Co v Ontvanger der Directe Belastingen and Netherlands State [1990] ECR I-583), or, as in Case C-23/ 89 Quietlynn Limited and Richards v Southend Borough Council [1990] ECR I-3059, the prohibition of sale of lawful sex goods from unlicensed sex establishments. All these national measures fell outside the scope of application of former Article 30 TEEC (now Article 34 TFEU) as they did not seek to control or affect trade between Member States. In a further series of cases, the Court of Justice was asked to rule on the compatibility of national laws prohibiting or restricting the employment of staff on Sundays and Sunday trading. In Case C-312/89 Union départementale des syndicats CGT de l’Aisne v SIDEF-Conforama [1991] ECR I-997 and Case C-332/89 Criminal proceedings against Marchandise [1991] ECR I-6457, the Court held that French and Belgian rules, respectively, prohibiting workers from working on Sundays, were not excessive and thus were compatible with former Article 28 TEC (now Article 34 TFEU). In Case C145/88 Torfaen Borough Council v B & Q plc [1989] ECR 3851 and Cases C-169/91 Council of the City of Stoke-on-Trent and Norwich City Council v B & Q plc [1992] ECR I-6635, the Court ruled that former Article 28 TEC did not apply to legislation such as the Shops Act 1950, prohibiting retailers from opening shops on Sunday, because it ‘reflected certain choices relating to particular national or regional socio-cultural characteristics’ (para 11), and its restrictive effects on trade were not excessive to the social aim pursued by such legislation (para 12). From these cases, the development of a new line of jurisprudence was perceptible. It was based on a distinction between national measures governing product characteristics, such as composition, characteristics and presentation of products, and national measures regulating market circumstances, such as place, time, manner, or authorised persons, etc. Only the former would be caught under the free movement of goods provisions. However, this distinction also led to a lot of confusion. In this context, the Keck and Mithouard ruling marked a greater evolution of this jurisprudence, by introducing a new important distinction between national measures governing product requirements and those concerning methods of sale.

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Examples of Measures Having Equivalent Effect Distinctly Applicable Measures Measures imposing conditions on imported goods only C-524/07 Commission v Austria

Import licences C-170/04 Klas Rosengren v Riksåklagaren

Inspections 251/78 Firma Denkavit Futtermittel GmbH

Indistinctly Applicable Measures Measures favouring or promoting domestic products Campaigns promoting domestic goods over imports 249/81 Commission v Ireland (Re Buy Irish Campaign) Measures making imports more costly or more difficult 113/80 Commission v Ireland (Re Irish Souvenirs) Public procurement measures or contracts designed to favour domestic firms 72/83 Campus Oil Ltd Administrative practices favouring domestic goods 21/84 Commission v France (Re Postal Franking Machines

Figure 13.2 Examples of measures having equivalent effect

Price restrictions

Maximum selling price 65/75 Riccardo Tasca Minimum selling price 82/77 Van Tiggele C-333/14 Scotch Whisky Association Maximum profit margin on retail sales 78/82 Commission v Italy

Production and marketing restrictions

Indications of origin 207/83 Commission v UK Production or manufacturing requirements 261/81 Walter Rau v De Smedt 178/84 Germany (Re Law of Purity of Beer)

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Review of the scope of application of Article 34 TFEU: Keck and Mithouard

se

ca ple Owing to the wide application of the Dassonville formula and the increasing number of xam e cases involving the first Cassis de Dijon principle, the Court of Justice felt it necessary and appropriate to reassess its case law on the application of former Article 30 TEEC (now Article 34 TFEU) and the concept of MHEE. In Joined Cases C-267 and C-268/91 Criminal proceedings against Keck and Mithouard [1993] ECR I-6097, the Court indeed observed that [i]n view of the increasing tendency of traders to invoke Article [34] of the Treaty as a means of challenging any rules whose effect is to limit their commercial freedom even where such rules are not aimed at products from other Member States, the Court considers it necessary to re-examine and clarify its case law on this matter. (para 14) In this case, a French competition rule prohibited the sale or resale in France of imported or domestic products in an unaltered state at less than their purchase price, ie at a loss. Keck and Mithouard separately imported products and sold them at a loss, with a view to making inroads into the French market. They were prosecuted for breach of the French measure in the Strasbourg Court, but claimed that the French law prohibiting resale at a loss was a MHEE. In contrast, the French authorities argued that the measure was justified, as it was aimed at preventing predatory pricing, whereby a supplier sells at a loss in order to drive competitors out of the market, only then to take advantage of being the only supplier, enabling it to put up the price again and recover its loss. In the long term, such a strategy is not regarded as being in the best interests of consumers. After reiterating the Dassonville formula (para 11), the Court of Justice confirmed that a national law ‘imposing a general prohibition on resale at a loss is not designed to regulate trade in goods between Member States’ (para 12). Indeed, even if it may restrict the volume of sales, and ‘therefore the volume of sales of products from other Member States, in so far as it deprives traders of a method of sales promotion’, this is not sufficient to regard such law as a ‘measure having equivalent effect to a quantitative restriction’ on imports (para 13). Then, after recalling the principles laid down in the Cassis de Dijon case (para 15), the Court stated: By contrast, contrary to what has previously been decided, the application to products from other Member States of national provisions restricting or prohibiting certain selling arrangements is not such as to hinder directly or indirectly, actually or potentially, trade between Member States within the meaning of the Dassonville judgment, so long as those provisions apply to all relevant traders operating within the national territory and so long as they affect in the same manner, in law and in fact, the marketing of domestic products and of those from other Member States. (para 16)

In other words, the Court stated that national measures that restrict or prohibit certain selling arrangements, automatically fall outside the scope of application of Article 34 TFEU and therefore are not MHEEs within the Dassonville formula, provided that they: (a) apply to all traders within the Member State (principle of universality); and (b) affect in the same manner, in law and in fact, the marketing of domestic and imported goods (principle of neutrality). In such circumstances, imported goods are not impeded in the Member State by the national measure any more than domestic goods are, in which case the measure does not fall foul of Article 34 TFEU in the first place. Thus, the Court drew a sharp distinction between: (a) obstacles to the free movement of goods arising from rules laying down requirements to be met by the goods, ie their physical characteristics (size, weight,

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composition, presentation, labelling and packaging), such rules falling within the scope of the Dassonville formula; and (b) national rules relating to the prohibition or restriction of methods of sale (‘selling arrangements’), such national rules being deemed not to hinder intra-EU trade, provided they satisfy the principles of universality and neutrality. Examples of national measures governing ‘certain selling arrangements’ The principle in Keck was applied in numerous subsequent cases, such as Case C-292/ 92 Hünermund and others v Landesapothekerkammer Baden-Württemberg [1993] ECR I-6787, which concerned a rule of professional conduct laid down by a German regional pharmacists’ association, prohibiting pharmacists from advertising outside the pharmacy quasi-pharmaceutical products that they were allowed to sell. The Court ruled that such rule was not caught by former Article 30 TEEC (now Article 34 TFEU) as it was not directed towards intra-EU trade and applied equally to all domestic and imported goods. As such, advertising falls within Keck’s concept of ‘selling arrangements’, and escaped the scope of application of former Article 30 TEEC. This was confirmed in the subsequent Case C-412/93 Société d’Importation Edouard Leclerc-Siplec v TF1 Publicité SA and M6 Publicité SA [1995] ECR I-179. In this case, French rules prohibited the fuel distribution sector from advertising on national television. Other forms of advertising were available however. The Court ruled that, provided that the principles of universality and neutrality were satisfied, the application of such rules to the sale of products from another Member State meeting the requirements laid down by that State is not by nature such as to prevent their access to the market or to impede access any more than it impedes the access of domestic products … (para 21) The French rules concerned selling arrangements, since they prohibited ‘a particular form of promotion (televised advertising) of a particular method of marketing products (distribution)’ (para 22), and therefore they fell outside the scope of former Article 30 TEEC. A restriction on the opening hours of outlets was also deemed to concern selling arrangements in Joined Cases C-401 and 402/92 Criminal proceedings against Tankstation ’t Heukske vof and JBE Boermans [1994] ECR I-2199 (petrol station opening hours); Case C-391/92 Commission v Greece (Re Infant Formula) [1995] ECR I-1621 (Greek law requiring processed milk for infants to be sold only by pharmacies) and Joined Cases C-69 and 258/93 Punto Casa SpA v Sindaco del Comune di Capena and Comune di Capena and Promozioni Polivalenti Venete Soc coop arl (PPV) v Sindaco del Comune di Torri di Quartesolo and Comune di Torri di Quartesolo [1994] ECR I-2363 (prohibition of certain kinds of Sunday trading). National measures not regarded as governing ‘certain selling arrangements’ As the Court has deliberately avoided defining clearly the notion of ‘selling arrangements’, preferring to deal with national provisions on a case-by-case basis, this concept remains unclear. Depending on the angle from which a national measure is analysed, it may be deemed to deal with selling arrangements or not. Consequently, certain rules that seem to fall into the category of selling arrangements are in fact treated as rules relating to products.

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Measure restricting or prohibiting ‘certain selling arrangements’ C-267 and C-268/91 Keck and Mithouard Falls outside of Article 34 TFEU if: it applies to all trades (universality principal) and it affects in the same manner, in law and in fact, the marketing of domestic and imported goods (neutrality principle) Examples of measures governing ‘certain selling arrangements’ Prohibition on selling or reselling at a loss C-267 and C-268/91 Keck and Mithouard Prohibition or restriction of advertising C-292/92 Hünermund C-412/93 Edouard Leclerc-Siplec C-71/102 Herbert Kamer Industrie-Auktionen GmbH Restriction on the opening hours of outlets C-401 and 402/92 Tonkstation ‘t Heukske vof C-391/92 Commission v Greece (Re Infant Milk formula) C-69 and 258/93 Punto Casa SpA

Examples of measures not regarded as governing ‘certain selling arrangements’ Prohibition on selling a product with a ‘+10%’ marking on packaging C-470/93 Mars GmbH Prohibition on including prize competitions in newspapers and magazines C-368/95 Familiapress Prohibition on the keeping of an animal species in a certain territory C-67/97 Ditlev Bluhme Requirements for the classification of frozen products as bread C-158/04 Alpha Vita Vassilopoulos AE C-159/04 Carrefour Marinopoulos AE

Figure 13.3 Examples of measures restricting or prohibiting ‘certain selling arrangements’

This was indeed the case as regards a German rule prohibiting the sale of Mars icecream bars with a ‘+10%’ marking on the packaging (Case C-470/93 Verein gegen Unwesen in Handel und Gewerbe Köln eV v Mars GmbH [1995] ECR I-1923, para 13) and Austrian legislation prohibiting publishers from including prize competitions, such as crossword puzzles, in newspapers or magazines (Case C-368/95 Vereinigte Familiapress Zeitungsverlags- und vertriebs GmbH v Heinrich Bauer Verlag [1997] ECR I-3689, para 11). Equally, a Danish prohibition on the keeping on Læso Island of bees other than the Læso brown bees, was not deemed to govern a selling arrangement as it concerned the intrinsic characteristics of bees (Case C-67/97 Criminal proceedings against Bluhme [1998] ECR I-8033, para 21). In Joined Cases C-158/04 Alfa Vita Vassilopoulos AE and C-159/04 Carrefour Marinopoulos AE v Elliniko Dimosio and Nomarchiaki Aftodioikisi Ioanninon [2006] ECR I-8135, the Court held that a Greek measure classifying frozen ‘bake-off’ products as bread, and thus requiring licences to operate ovens and the fulfilment of certain building requirements, was aimed to specify production conditions for baked products, and therefore constituted ‘a barrier to imports which [could not] be regarded as establishing a selling arrangement as contemplated in Keck and Mithouard’ (para 19).

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The limits of the Keck and Mithouard approach The distinction operated by the Court in Keck and Mithouard was criticised from its outset in the Court itself, by Advocates General and academics, for being too rigid. In his Opinion in Case C-412/93 Leclerc-Siplec [1995] ECR I-179, Advocate General Jacobs criticised the Keck and Mithouard approach and offered an alternative analysis. In his view, the Court’s reasoning – although not the result – in Keck is unsatisfactory for two reasons. First, it is inappropriate to make rigid distinctions between different categories of rules, and to apply different tests depending on the category to which particular rules belong. The severity of the restriction imposed by different rules is merely one of degree. Measures affecting selling arrangements may create extremely serious obstacles to imports. For example, a rule permitting certain products to be sold only in a handful of small shops in a Member State would be almost as restrictive as an outright ban on importation and marketing. (para 38) And [s]econdly, the exclusion from the scope of Article [34 TFEU] of measures which ‘affect in the same manner, in law and in fact, the marketing of domestic products and those from other Member States’ amounts to introducing, in relation to restrictions on selling arrangements, a test of discrimination. That test, however, seems inappropriate. … If an obstacle to inter-State trade exists, it cannot cease to exist simply because an identical obstacle affects domestic trade … (para 39) On the assumption that the ‘principle should be that all undertakings should have unfettered access to the whole of the [single] market’, he then proposed the de minimis test as an alternative, which assesses whether there is a substantial restriction on access to this market (para 42). According to Advocate General Poaires Maduro, in his Opinion in Joined Cases C158 and 159/04 Alfa Vita Vassilopoulos [2006] ECR I-8135, Keck has ‘proved to be a source of uncertainty for economic operators’, as … [i]n some cases, it is difficult to distinguish selling arrangements from national rules relating to the characteristics of products, for the very reason that the existence of a restriction on trade is dependent on the method of application of a rule and its concrete effects. In other cases, it is impossible to include a measure within one or other of these categories because the variety of rules which may be called into question does not fit easily into such a restricted framework. (para 31) He identified three criteria, applied by the Court, amounting to identifying discrimination against the exercise of freedom of movement, namely: (a) the Court maintains that any discriminatory provisions, direct or indirect, are prohibited (para 43); (b) imposing supplementary costs on goods in circulation in the EU or on traders’ cross-border activities has to be duly justified. Selling arrangements (such as resale at a loss, or the prohibition of Sunday trading) do not normally impose such costs, but if they did they should be regarded as MHEEs (para 44); (c) any national measure impeding access to the market and the putting into circulation of products from other Member States is to be considered to be a MHEE (para 45).

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The Court of Justice has never contemplated adopting the de minimis test, and is unlikely to do so. However, the test whereby a national measure must affect both domestic and imported products, in the same manner, in law and in fact (principle of neutrality) has proved difficult to apply at times, thus forcing the Court to apply a market access test, as the cases below illustrate. National measures that limit market access In paragraph 17 of the Keck and Mithouard ruling, the Court made a reference to ‘market access’. Indeed, it observed that, provided the conditions set out in Keck were fulfilled by national rules relating to selling arrangements, their application to the sale of products from another Member State meeting the requirements laid down by the importing State ‘is not by nature such as to prevent their access to the market or to impede access any more than it impedes the access of domestic products’.

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ca ple The issue of access to the national market would arise, should one of the Keck criteria not xam e be fulfilled by a national rule. In Joined Cases C-34-36/95 Konsumentombudsmannen (KO) v De Agostini (Svenska) Förlag AB and TV-Shop i Sverige AB [1997] ECR I-3843, the Court was requested to examine the compatibility with (then) EC law of, first, a Swedish partial ban on television advertising of a magazine called Everything About Dinosaurs, directed at children under the age of 12 (Case C-34/95); and, secondly, a ban on the broadcast of infomercials for ‘Body De Lite’ skin-care products (Case C-35/95) and detergents (Case C-36/95). The Court held that the Swedish law related to a selling arrangement, but it could not ‘be excluded that an outright ban, applying in one Member State, of a type of promotion for a product which is lawfully sold there might have a greater impact on products from other Member States’ (para 42). It particularly noted that ‘television advertising was the only effective form of promotion enabling De Agostini to penetrate the Swedish market, since it had no other advertising methods for reaching children and their parents’ (para 43). Consequently, an outright ban on advertising aimed at children less than 12 years of age and of misleading advertising, … is not covered by Article [34] of the Treaty, unless it is shown that the ban does not affect in the same way, in fact and in law, the marketing of national products and of products from other Member States. (para 44) In the latter case, in particular where the national measure imposes the same burden in law but a different one in fact (as seemed to be the case as regards the Swedish ban, as strongly suggested by the Court in para 43), the measure would have to be necessary to satisfy a mandatory requirement (see 14.3.1), or be justified under Article 36 TFEU, and be proportionate for that purpose (para 47).

A similar situation occurred in Case C-405/98 Konsumentombudsmannen (KO) v Gourmet International Products AB (GIP) [2001] ECR I-1795, which concerned a Swedish ban on advertising alcohol on radio, television and in magazines. Although the Swedish law could be viewed as relating to a selling arrangement, in the case of products like alcohol, the consumption of which is linked to traditional social practices and to local habits and customs, a prohibition of all advertising directed at consumers in the form of advertisements in the press, on the radio and on television, the direct mailing of unsolicited material or the placing of posters on the public highway is liable to impede access to the market by products from other Member States more than it impedes access by domestic products, with which consumers are instantly more familiar. (para 21)

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In such a case, a breach of Article 34 TFEU would have to be justified, under Article 36 or the first Cassis de Dijon principle (see Chapter 14), on the ground of protection of public health against the harmful effects of alcohol, provided that could be ensured by measures having less effect on intra-EU trade (para 34). More significantly, it is very clear from the wording of paragraph 18 of this ruling that the Court based its reasoning on the concept of market access. Indeed, it stated that if … national provisions restricting or prohibiting certain selling arrangements are to avoid being caught by Article [34] of the Treaty, they must not be of such a kind as to prevent access to the market by products from another Member State or to impede access any more than they impede the access of domestic products. (emphasis added) This approach was further confirmed in Case C-239/02 Douwe Egberts NV v Westrom Pharma NV and Souranis [2004] ECR I-7007, which dealt with a Belgian law prohibiting references in the advertising of coffee products imported from other Member States to ‘slimming’ and to ‘medical recommendations, attestations, declarations or statements of approval’. Referring to its ruling in Gourmet, the Court confirmed that ‘an absolute prohibition of advertising the characteristics of a product is liable to impede access to the market by products from other Member States more than it impedes access by domestic products, with which consumers are more familiar’ (para 53). The sale of products over the Internet has also been an issue analysed by the Court under the market access lens. An interesting decision is Case C-322/01 Deutscher Apothekerverband eV v 0800 DocMorris NV and Waterval [2003] ECR I-14887. DocMorris, a Dutch company, ran a ‘standard’ pharmaceutical business in a pharmacy in the Netherlands, and was selling medicinal products by mail order over the Internet. Both activities were covered by a licence issued by the Dutch authorities. In 2000, DocMorris started to offer prescription and non-prescription medicines for human use for sale online, for end consumers in Germany. The sale of medicines by DocMorris over the Internet to German consumers was challenged in a Frankfurt court by the German pharmacists’ association, on the ground that a German 1998 law on medicinal products did not permit the sale by mail order of medicinal products that could only be sold in pharmacies. The Court held that the prohibition of sales of medicines over the Internet was more of an obstacle to pharmacies outside Germany than to those within it. Although there is little doubt that as a result of the prohibition, pharmacies in Germany cannot use the extra or alternative method of gaining access to the German market consisting of end consumers of medicinal products, they are still able to sell the products in their dispensaries. However, for pharmacies not established in Germany, the Internet provides a more significant way to gain direct access to the German market. A prohibition which has a greater impact on pharmacies established outside German territory could impede access to the market for products from other Member States more than it impedes access for domestic products. (para 74)

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National measures that impose a ban on, or restriction on, use of products legally produced and marketed In more recent cases, the Court has had to analyse the effect on the free movement of goods of national measures banning or restricting the use of products lawfully produced and marketed in other Member States. In Case C-265/06 Commission v Portugal [2008] ECR I-2245, Advocate General Trstenjak approached the Portuguese measure, a ban on the fixing of tinted film onto vehicle windows, through the Dassonville formula (see 13.2.3.1). However, although indistinctly applicable and non-discriminatory, she viewed the prohibition as being capable of limiting opportunities for intra-EU trade in the products in question, and as hampering imports and the marketing of such products. Following its Advocate General, the Court applied the Dassonville formula to find the restriction on the use of tinted film to be a MHEE, as potential purchasers would in practice have no interest in buying the product, knowing that fixing it to vehicle windows was prohibited (para 33). National measures not fulfilling the Keck and Mithouard criteria National measures governing ‘certain selling arrangements’ and limiting market access Ban on advertising of alcohol on all media C-405/98 Gourmet International Products AB Prohibition on references in the advertising of products to ‘slimming’ or ‘medical recommendation’ C-239/02 Douwe Egberts NV Restrictions on the sale of products over the Internet C-322/01 Deutscher Apothekerverband v DocMorris NV C-108/09 Ker-Optika bt

National measures restricting or prohibiting the use of products Ban on the fixing of tinted film onto car windows C-265/06 Commission v Portugal Prohibition on the towing of trailers by motorcycles C-110/05 Commission v Italy Restriction on the use of jet-skis to designated navigable waterways C-142/05 Åklagaren v Mickelsson and Roos Prohibition on registration of right-hand drive cars C-639/11 Commission v Poland C-61/12 Commission v Lithuania

Figure 13.4 National measures not fulfilling the Keck and Mithouard criteria

In Case C-110/05 Commission v Italy (Re Trailer) [2009] ECR I-519, Advocate General Léger also followed Dassonville with regard to the Italian measure, which prohibited the towing of trailers by motorcycles. Although indistinctly applicable and non-discriminatory, like Advocate General Trstenjak in the case above, Advocate General Léger regarded the prohibition as likely to limit opportunities for intra-EU trade in the products in question, and as hampering imports and the marketing of such

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products. In a second opinion, Advocate General Bot advised the Court not to apply Keck to the restriction/prohibition of use of a product, but rather to apply a straightforward market access test/approach. He argued that a measure that hinders, prevents or make more difficult market access is in breach of former Article 28 TEC (now Article 34 TFEU), and found the Italian measure to be a MHEE. The Grand Chamber of the Court analysed the problem from the viewpoint of market access. It distinguished between trailers specifically designed for motorcycles and those capable of being towed by other vehicles. As regards the former, the Court accepted the Commission’s argument that the Italian prohibition was a MHEE. Indeed, it argued, the prohibition on use of a product exercises a considerable effect on the behaviour of consumers, which in turn affects the access of that product to the market of the Member State. In Case C-142/05 Åklagaren v Mickelsson and Roos [2009] ECR I-4273, Advocate General Kokott preferred to rationalise the Swedish restriction on the use of jet-skis under the Keck formula, and considered the measure to be excluded from the scope of former Article 28 TEC (now Article 34 TFEU) unless it prevented access to the market for imports. A marginal possibility of using the product was equated with absolute prevention of market access. However, the Court confirmed that former Article 28 TEC captured measures that not only prohibited but also restricted the use of products, here the use of jet-skis being restricted to designated navigable waterways.

13.2.4 Quantitative restrictions and measures having equivalent effect on exports Although Article 35 TFEU is worded in terms similar to those of Article 34, the Court of Justice seems to have been more tolerant of national measures that have the potential to hinder only exports. A national measure will be in breach of Article 35 TFEU only if it is overtly or covertly protectionist, that is it has as [its] specific object or effect the restriction of patterns of exports and thereby the establishment of a difference in treatment between the domestic trade of a Member State and its export trade in such a way as to provide a particular advantage for national production or for the domestic market of the State in question at the expense of the production or of the trade of other Member States. (Case 15/79 PB Groenveld BV v Produktschap voor Vee en Vlees [1979] ECR 3409 para 7) Three criteria must therefore be satisfied: (a) a restriction of patterns of exports; (b) a difference in treatment between a Member State’s domestic trade and its export trade; and (c) an unfair advantage for domestic trade. These conditions were confirmed in Case 172/82 Inter-Huiles and Others [1983] ECR 555, para 12, and in Case C-209/98 Entreprenørforeningens Affalds/Miljøsektion (FFAD) v Københavns Kommune [2000] ECR I-3743, para 34. In the latter case, the Court held that a system for the collection and receipt of non-hazardous building waste destined for recovery, set up by the Municipality of Copenhagen, under which a limited number of undertakings were authorised to process waste produced in the municipality, was in breach of former Article 34 TEC (now Article 35 TFEU) and

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could not be justified under Article 36 TEC (now Article 36 TFEU) or in the interest of environmental protection. On the basis of the criteria listed above, the Court found that a Dutch law prohibiting certain ingredients from being used in Gouda and Edam cheese made in Holland and for consumption in Holland, but leaving imported cheese unaffected, was not in breach of former Article 34 TEEC (now Article 35 TFEU) (Case 237/82 Jongeneel Kaas BV and others v State of the Netherlands and Stichting Centraal Orgaan Zuivelcontrole [1984] ECR 483). The Groenveld criteria above did not apply to provisions that ‘lay down minimum standards of quality for cheese production, without making any distinction as to whether the cheese is intended for the domestic market or for export’ (para 22). In contrast, a measure such as a French law requiring that watches intended for export had to submit to inspection before getting an export licence, whereas there was no such requirement of inspection for watches intended for the domestic market, was deemed to be in breach of former Article 34 TEEC. It was a distinctly applicable measure as it applied only to exports, and it discriminated against exports as it made it more difficult for consumers in other Member States to purchase the French watches (Case 53/76 Procureur de la République de Besançon v Les Sieurs Bouhelier and others [1977] ECR 197, paras 15 and 16). Equally, a measure such as a Spanish law limiting the quantity of Rioja wine available for export in bulk to other Member States was deemed to fall foul of former Article 34 TEEC, as it had the ‘specific effect of restricting exports of wine in bulk and in particular, of procuring a special advantage for bottling undertakings situated in the region of production’ (Case C-47/90 Établissements Delhaize frères and Compagnie Le Lion SA v Promalvin SA and AGE Bodegas Unidas SA [1992] ECR I-3669). However, on a re-examination of the same rules in Case C-388/95 Belgium v Spain [2000] ECR I3123, the Court decided that instead of considering whether or not bottling in the region of production of Rioja should be regarded as a stage in the process of production of that wine, it should rather focus on the reasons for which bottling should be carried out in the region of production, and on whether those reasons were capable of justifying the Spanish measure, intended to ensure that the ‘denominación de origen calificada’ fulfilled its function of guaranteeing the origin of the wine. In light of European legislation aimed at enhancing the quality of agricultural products, especially in the wine sector, in order to promote their reputation through, notably, the use of designations of origin, and in light of Council Regulation (EEC) No 2081/92 of 14 July 1992 on the protection of geographical indications and designations of origin for agricultural products and foodstuffs, the Court accepted that ‘[d]esignations of origin fall within the scope of industrial and commercial property rights … They are intended to guarantee that the product bearing them comes from a specified geographical area and displays certain particular characteristics’ (para 54). And that [t]he rules governing the Rioja ‘denominación de origen calificada’ are designed to uphold those qualities and characteristics. By ensuring that operators in the wine growing sector of the Rioja region, at whose request the designation of origin was granted, control bottling as well, they pursue the aim of better safeguarding the quality of the product and, consequently, the reputation of the designation, for which they now assume full and collective responsibility. (para 58) Generally, such national rules are not very common, as it is not usual for a Member State to want to pass rules that effectively make export of the goods more difficult. This

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could explain why the Court treated MHEEs on imports and on exports differently. However, following a number of criticisms, the Court reviewed its position in Case C205/07 Lodewijk Gysbrechts and Santurel Inter BVBA [2008] ECR I-9947. Gysbrechts was the founder and manager of Santurel, a business specialising in the wholesale and retail sale of food supplements, with a big part of its sales being made online by means of the company’s Internet site. Once ordered, the goods were sent to the purchasers by post. Both Gysbrecht and Santurel were prosecuted in Belgium for breaching the provisions on distance selling in the 1991 Belgian Law on Consumer Protection, and notably for disregarding its prohibition, under Article 80(3), on requiring consumers to provide a deposit or any form of payment before the expiry of the period of seven working days, within which withdrawal from the contract was permitted. Santurel and Gysbrechts argued that the prohibition concerned was an unjustified obstacle to the free movement of goods, notably to the export of national goods. The Court noted that the prohibition laid down in Article 80(3) of the Belgian Law was within the scope of Directive 97/7/EC ([1997] OJ L144/19). However, harmonisation under this Directive was not exhaustive, thus allowing Member States to introduce more stringent consumer protection rules, provided they were Treaty compliant. The Court therefore held that Article 80(3) of the Belgian Law could be examined in light of former Article 28 TEC (now Article 34 TFEU), and more specifically of Article 29 TEC (now Article 35 TFEU), as the Belgian provision had been applied in a case relating to the exports of goods from Belgium to other Member States (paras 32–36). The Court observed, first, that traders were deprived of an efficient tool to guard themselves against the risk of non-payment by the prohibition against requiring an advance payment; secondly, that such a prohibition had more significant consequences in cross-border sales made directly to consumers by means of the Internet, notably because of the difficulties in suing any defaulting consumers in another Member State; thirdly, that the effect of such prohibition was greater on goods leaving the market of the exporting Member State than on the marketing of goods in its domestic market, even if the prohibition applied to all traders operating in that Member State (paras 41– 43). The Court then concluded that a national measure … prohibiting a supplier in a distance sale from requiring an advance or any payment before expiry of the period for withdrawal constitutes a measure having equivalent effect to a quantitative restriction on exports. The same is true of a measure prohibiting a supplier from requiring that consumers provide their payment card number, even if the supplier undertakes not to use it to collect payment before expiry of the period for withdrawal. (para 44) Although the Court referred in this ruling to the Groenveld criteria (para 40; see above), it is clear that the Court interpreted a MHEE under former Article 29 TEC (now Article 35 TFEU) in a manner consistent with its interpretation of former Article 28 TEC (now Article 34 TFEU). By emphasising the fact that the Belgian prohibition had a greater effect on exports than on the marketing of the goods in the domestic market, the Court focused on its hindering effect on trade. This realignment of the interpretation of Article 34 is further confirmed by the fact that the Court accepted for the first time that a restriction on exports could also be justified ‘by overriding requirements of public interest, provided that the measure is proportionate to the legitimate objective pursued’ (para 45) (see 14.3.1).

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13.3 Further reading Derlin M and Lindholm J, ‘Article 28 EC and Rules on Use: A Step Towards a Workable Doctrine on Measures Having Equivalent Effect to Quantitative Restrictions’ (2010) 16 Columbia Journal of European Law 191. Gormley L, ‘Free Movement of Goods and their Use – What is the Use of it? (2010) 33 Fordham International Law Journal 1589. Gormley L, ‘Inconsistencies and Misconceptions in the Free Movement of Goods’ (2015) 40(6) EL Rev 925. Gorywoda L, ‘The New European Legislative Framework for the Marketing of Goods’ (2009) 16 Columbia Journal of European Law 161. Hojnik J, ‘Free Movement of Goods in a Labyrinth. Can Buy Irish Survive the Crises? (2012) 49 CML Rev 291. Jansson M and Kalimo H, ‘De Minimis Meets “Market Access”: Transformations in the Substance – and the Syntax – of EU Free Movement Law? (2014) 51 CML Rev 523. Möstl M, ‘Preconditions and Limits of Mutual Recognition’ (2010) 47 CML Rev 405. Oliver P, ‘Of Trailers and Jet Skis: Is the Case Law on Article 34 TFEU Hurtling in a New Direction?’ (2010) 33 Fordham International Law Journal 1423. Prete L, ‘Of Motorcycle Trailers and Personal Watercrafts: the Battle over Keck’ (2008) 35(2) Legal Issues of Economic Integration 133. Schütze R, ‘Of Types and Tests: Towards a Unitary Doctrinal Framework for Article 34 TFEU?’ (2016) 41(6) EL Rev 826. Shuibhne N, ‘The Treaty is Coming to Get You’ (2012) 37(4) EL Rev 367. Snell J, ‘The Notion of Market Access: A Concept or a Slogan?’ (2010) 47 CML Rev 437. Szydlo M, ‘Export Restrictions within the Structure of the Free Movement of Goods. Reconsiderations of an Old Paradigm’ (2010) 47 CML Rev 753. Tryfonidou A, ‘Further Steps on the Road to Convergence among the Market Freedoms’ (2010) 35(1) EL Rev 36. Wenneras P and Moen K, ‘Selling Arrangements, Keeping Keck’ (2010) 35(3) EL Rev 387. Wilsher D, ‘Does Keck Discrimination Make Any Sense? An Assessment of the Nondiscrimination Principle within the European Single Market’ (2008) 33(1) EL Rev 3.

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Non-tariff barriers are prohibited under Articles 34 and 35 TFEU. These include quantitative restrictions on imports and exports, as well as measures having equivalent effect (MHEEs). Owing to the deliberate general wording of those Treaty provisions, it was left to the ECJ to define and refine those two concepts. While the former was easily defined by the Court in the Geddo case, the latter proved more problematic. At first the Court offered a broad definition of a ‘measure having an equivalent effect’ in the Dassonville judgment, with a view to covering all existing and future national trade restrictions. This approach was further supported by the elaboration of the principle of mutual recognition in the second key case of Cassis de Dijon. However, recognising that this approach showed its practical limitations, in the third key ruling of Keck and Mithouard, the Court drew a distinction between national measures affecting product characteristics and national measures restricting or prohibiting ‘certain selling arrangements’, the latter falling outside the scope of Articles 34 and 35 TFEU, provided they are universal and neutral in law and in fact. Notwithstanding the lack of definition of ‘selling arrangements’, this new approach also showed its own limitation, especially in the case of national measures that are neutral in law but not in fact. This situation led the Court to refine its definition of MHEEs further, by gradually referring to the concept of market access, whereby any national measure prohibiting or restricting access to a national market is to be regarded as prohibited under the Treaty. However, it is to be noted that the Court has not opted for a full application of the market access test as the sole criterion for the application of Article 34 TFEU at the expense of the Dassonville, Cassis de Dijon and Keck approaches, as had been suggested by Advocate General Bot in his Opinion in Case C-110/05 Commission v Italy (Re Trailer) [2009] ECR I-519. Test Your Knowledge

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Sirops Bio, one of the biggest manufacturers of cordials in France, has concerns over various issues of EU law. Advise Sirops Bio, in the following scenarios, as to whether there is a breach of Article 34 TFEU: (a) The Estonian authorities require cordials to be packaged in glass bottles, so that Estonian citizens can distinguish them from fruit-flavoured bottled water that is packaged in plastic bottles. Sirops Bio packages its drinks in plastic bottles only. (b) The Danish state television companies ban the advertising of cordials before the watershed of 21:00, as there are concerns that the high sugar content of these drinks could have a detrimental effect on children’s teeth. ‘La Selle’ is a new brand of horse saddles manufactured by the French company, Equus SA. It has become very popular with horse riders throughout Europe for its particular ergonomic features. However, German manufacturers of riding equipment are not too happy about the detrimental effect this has had on their industry, and have exerted pressure on the German Government to take action to limit imports of this new product. The managing director of Equus SA, Pauline Chevalier, has recently learnt that the German authorities are: (a) imposing inspections, on the ground that, according to the latest research conducted in Germany, some of the French saddles may cause irreversible back injuries to horses; (b) prohibiting the advertising of Equus saddles in German horse-riding magazines; and (c) prohibiting the use of Equus saddles in horse trials in Germany Advise Pauline Chevalier on the lawfulness of the German measures under Article 34 TFEU.

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The Free Movement of Goods: Derogations and Justifications

After reading this chapter, you will be able to understand: • the derogations from the free movement of goods provided for under Articles 36 and 114 TFEU • the justifications for the free movement of goods under the first Cassis de Dijon principle, and under general principles of law as developed by the CJEU • the conditions for the application of those derogations and justifications.

14.1 Introduction At the time of the drafting of the Treaty of Rome, it was not conceivable that a general and rigid principle prohibiting non-fiscal trade barriers could be laid down, without allowing Member States the ability to justify some barriers on the ground of protection of legitimate national interests. This flexibility was allowed within the strict framework of the provisions of Article 30 of the Treaty of Rome (now Article 36 TFEU), which set out a limited list of grounds for derogations from the principle of prohibition of trade barriers, and laid down the strict conditions under which these might be relied upon by the Member States (see 14.2). Later on, the 1986 Single European Act introduced new derogations under former Article 95 TEEC (now Article 114 TFEU), on the approximation of national laws (see 14.2.2). Furthermore, as the original Treaty derogations proved to be insufficient to embrace new forms of justification for the protection of general public interests, in the Cassis de Dijon case the Court created new derogations, known as mandatory requirements (see 14.3.1.3).

14.2 Treaty derogations Originally provided for in a limited way in Article 30 of the Treaty of Rome (now Article 36 TFEU), justifications for trade barriers were further expanded under former Article 95 TEEC (now Article 114 TFEU).

14.2.1 Derogations under Article 36 TFEU Under Article 36 TFEU: The provisions of Articles 34 and 35 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.

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14.2.1.1

General considerations Scope of application of Article 36 TFEU It is first important to note that Article 36 refers to the provisions of Articles 34 and 35 TFEU and, as such, cannot be relied upon to justify tariff barriers prohibited under Article 30 TFEU (Case 7/68 Commission v Italy (Art Treasures) [1968] ECR 423, 430). Secondly, the Court repeatedly held, as in Case 153/78 Commission v Germany (Re Restrictions on Imports of Meat Products) [1979] ECR 2555, that … the purpose of Article 36 of the Treaty is not to reserve certain matters to the exclusive jurisdiction of the Member States; it merely allows national legislation to derogate from the principle of the free movement of goods to the extent to which this is and remains justified in order to achieve the objectives set out in the article. (para 5) Thirdly, the list of derogations in Article 36 is exhaustive, but it reflects what were seen as priorities in 1957. In particular, it does not include the protection of the environment, of consumers or culture, etc. (See Case 229/83 Association des Centres distributeurs Édouard Leclerc and others v SARL ‘Au blé vert’ and others [1985] ECR 17, para 30.) Article 36 has never been amended. The Court has always interpreted those derogations restrictively (Case 46/76 W J G Bauhuis v The Netherlands [1977] ECR 5, para 12; Case 113/80 Commission v Ireland (Re Irish Souvenirs) [1981] ECR 1625, para 7). Article 36 TFEU cannot be relied upon by Member States to protect economic interests (Case 95/81 Commission v Italy [1982] ECR 2187, para 27; Case 72/83 Campus Oil Limited and others v Minister for Industry and Energy and others [1984] ECR 2727, para 35; Case C-120/95 Decker v Caisse de maladie des employés privés [1998] ECR I-1831, para 39). Nor can it be relied upon once EU measures of harmonisation have been adopted (Case 5/77 Tedeschi v Denkavit Commerciale srl [1977] ECR 1555, para 35; Case 197/08 Commission v France [2010] ECR I-1599, paras 49–50). In such a context, Member States cannot impose stricter requirements under Article 36 TFEU than those laid down by a directive, unless expressly provided for in the directive or where harmonisation is only partial (Carlo Tedeschi v Denkavit, above, para 49). Conditions of application of Article 36 TFEU If a national measure appears to be justifiable on one of the grounds set out in Article 36 TFEU, it must not be: (a) an ‘arbitrary discrimination’, that is a measure which is not justified on objective grounds. For example, in Case 152/78 Commission v France [1980] ECR 2299, para 18, a French measure restricting the advertising of grain spirits but not that of wine spirits could not be justified on objective grounds and was found to amount to arbitrary discrimination; and/or (b) a ‘disguised restriction’ on trade between the Member States, or a measure presented as protecting one of the national interests under Article 36 while in fact being adopted for some other, illegitimate reason. In Case 40/82 Commission of the European Communities v United Kingdom (Re Newcastle Disease – Import of Poultry Meat) [1982] ECR 2793, para 40, the reintroduction of a slaughter policy by the UK Government had no valid justification, as it was not necessary to deal with the risk of infection of national flocks by imported poultry products; in fact,

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under pressure from British poultry producers to block these imports, the Government had hurriedly introduced its new policy, without informing the Commission and the Member States concerned in good time, thus resulting in French Christmas turkeys being excluded from the British market for the 1981 season. The Court further requires that the national measure: (a) is necessary to protect the identified permitted ground (Case 274/87 Commission v Germany (Re Ban on the Importation of Meat Products) [1989] ECR 229, para 6; Case C-170/07 Commission v Poland (Re Technical Controls on Cars) [2008] ECR I-87, para 46; Case C-443/10 Bonnarde v Agence de Services et de Paiement [2011] ECR I-9327, para 32); and (b) does not go beyond what is necessary to achieve the permitted ground, that is, it must be proportionate. A measure is regarded as proportionate if it is not possible to protect the identified permitted ground in any less restrictive way (Re Technical Controls on Cars, above, para 46; Bonnarde, above, para 32; Case C-421/09 Humanplasma GmbH v Austria [2010] ECR I-12869, para 34). Another condition of substitutability, also known as minimal hindrance, adds further to the two requirements, of necessity and proportionality, listed above. It ensures that the hindrance to trade is the least restrictive possible, even if it is proportionate. In this respect, the Court will offer alternative measures that are less restrictive of trade (Case 298/87 Smanor SA [1988] ECR 4489, para 19; Case 261/81 Walter Rau Lebensmittelwerke v De Smedt PVBA [1982] ECR 3961, para 19; Case C-161/09 Kakavetsos-Fragkopoulos AE Epexergasias kai Emporias Stafidas v Nomarchiaki Aftodioikisi Korinthias [2011] ECR I-915, para 60). Normally, an outright ban will be found to be disproportionate, yet in Case C-473/98 Kemikalieinspektionen v Toolex Alpha AB [2000] ECR I-5681, a Swedish ban on trichloroethylene, a proven carcinogen, was found to be proportionate (para 49). According to the settled case law of the Court, the burden of proof is always on the Member States. It is for the national authorities to show that they could not take any less restrictive measure (Case 251/78 Firma Denkavit Futtermittel GmbH v Minister für Ernährung, Landwirtschaft und Forsten des Landes Nordrhein-Westfalen [1979] ECR 3369, para 24; Case 227/82 Criminal proceedings against Leendert van Bennekom [1983] ECR 3883, para 40; Case C-265/06 Commission v Portugal [2008] ECR I-2245, para 39). 14.2.1.2

Grounds for justification With the exception of the protection of national treasures possessing artistic, historic or archaeological value, which has given rise to very few cases, the grounds for derogations provided for under Article 36 TFEU can be grouped into three main categories, as discussed below. Public morality, public policy and public security All three concepts are at the core of national sovereignty, and the Court of Justice has recognised, in Case 34/79 R v Henn and Darby [1979] ECR 3795, that ‘[i]n 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’ (para 15). Under this principle, Member States have a wide discretion to protect, within their territories, public morality, policy and security, and may justify restrictions on imports

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on those grounds. Because of the contingent character of those concepts, as they vary from State to State and over time, the Court has always avoided defining them strictly. However, the Court will always examine whether the national measure is truly justified on one of those grounds, and, notably, whether it is an arbitrary measure or a disguised restriction. In other words, if … [m]ember States are free to establish their own standards concerning public morality, that freedom is subject to the principle that Member States may not apply conditions to imports which are stricter than those applicable to the manufacture and marketing of the same products within their territory. (Case 121/85 Conegate Limited v HM Customs & Excise [1986] ECR 1007, para 12) Public morality In R v Henn & Darby, a consignment of obscene films and magazines imported from Rotterdam into the UK was seized by British customs authorities under the Customs and Excise Act 1952, and the importers were prosecuted. The Court held that the UK law prohibiting the import of pornographic materials was a measure having equivalent effect (MHEE) to a quantitative restriction (para 13). However, this prohibition was genuinely applied to protect public morality, as there was no domestically produced material permitted by the UK legislation on sale of pornographic material. Therefore, no domestically produced material would have benefited from the import ban (paras 21–22). By contrast, in Conegate v HM Customs & Excise, the Court held that the seizure by HM Customs of inflatable dolls, on the ground that they were contrary to the UK prohibition on importing ‘indecent and obscene’ products, was an unjustifiable breach of former Article 30 TEEC. Indeed, there was no ban on the production and sale of such products in the UK – a ban applied only on the sale of products ‘likely to deprave or corrupt’, yet inflatable dolls could be sold in the UK if the premises from which they were sold were licensed. Since it was not illegal to produce and sell such products in the UK, the Court held that to ban the importation of such products could hinder trade between Member States (para 16). It might be difficult to see the obvious distinction between the two cases (the UK law concerned is the same in both cases), but it turns on the fact that in Henn & Darby, the Court accepted that there were no UK products on the market in the UK that were of a type that could be sold but which could not have been imported. Public policy The Court has construed ‘public policy’ narrowly, and Member States will rarely succeed in trying to rely on this ground to justify measures that have purely economic ends (Case 95/81 Commission v Italy [1982] ECR 2187, para 27). In this case, Italian rules required that all importers of goods coming from other Member States had to provide a security or a bank guarantee of up to 5% of the value of the goods when payment was made in advance. The Court rejected the Italian Government’s argument that the rules were justified on the ground of public policy, in that its objective was the safeguarding of the defence of its currency, a fundamental interest of the State. This narrow approach was confirmed in later cases, such as Case 231/83 Cullet v Centre Leclerc [1983] ECR 305, in which the Court held that the French requirement to sell petrol at a minimum price because of a threat to public order and security through violence, as an anticipated reaction of retailers affected by unrestricted competition, was unjustified (para 33). In Case C-265/95 Commission v France (Re Spanish

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Strawberries) [1997] ECR I-6959, the Court ruled that the failure by the French authorities to adopt necessary and proportionate measures, to prevent the free movement of fruit and vegetables from being obstructed by actions of private individuals, could not be justified on the ground that ‘determined action by the competent authorities might provoke violent reactions by those concerned, which would lead to still more serious breaches of public order or even to social conflict’ (para 54). Equally, in Case C-239/90 SCP Boscher, Studer et Fromentin v SA British Motors Wright and others [1991] ECR I-2023, the Court held that a French law, which imposed on a seller the requirement of prior entry in the trade register at the place where the auction sale took place, was liable to impede the free movement of goods and could not be justified on grounds of public policy. By contrast, the public policy justification was successful in Case 7/78 R v Thompson, Johnson and Woodiwiss [1978] ECR 2247, which concerned a UK ban on exporting silver coins in order to prevent their being melted down or destroyed in another Member State – a criminal offence in UK – even though they were no longer legal tender. The Court held that this ban was justified on grounds of public policy, because ‘it stems from the need to protect the right to mint coinage which is traditionally regarded as involving the fundamental interests of the State’ (para 34). Public security The Court accepted that an Irish measure, requiring that importers of crude oil bought a minimum of 35% of their requirements from the Irish national oil company at prices fixed by the Irish Government, was justified on grounds of public security, though discriminatory and protectionist, since the measure helped to preserve the Irish national oil industry, which was vital in times of national crisis (Case 72/83 Campus Oil Limited and others v Minister for Industry and Energy and others [1984] ECR 2727). It appears that this case was decided on its own particular facts, and that a similar defence now would be unlikely to succeed, as shown in Case C-398/98 Commission v Greece [2001] ECR I-7915. There, Greece required petrol companies to hold minimum stocks of petrol at their own installations. The companies were entitled to transfer their storage obligations to Greek government-owned refineries, provided the companies had bought large amounts of petrol from these refineries in the previous year. The Greek system on the compulsory maintenance of emergency stocks of petroleum products was deemed to be in breach of Article 30 TEC (now Article 36 TFEU), which could not be justified on grounds of public security. The Court notably pointed out that, although ‘the maintenance on national territory of a stock of petroleum products allowing continuity of supplies to be guaranteed constitutes a public security objective’ (para 29), in this case the arguments of the Greek Government were purely economic ones. However, in Case C-367/89 Criminal proceedings against Richardt and Les Accessoires Scientifiques SNC [1991] ECR I-4621, the Court held that ‘the concept of public security within the meaning of Article 36 of the Treaty covers both a Member State’s internal security and its external security’, and that ‘the importation, exportation and transit of goods capable of being used for strategic purposes may affect the public security of a Member State, which it is therefore entitled to protect pursuant to Article 36 of the Treaty’ (para 22). Consequently, in this case, Luxembourg legislation requiring a special transit licence for the export and import of goods of a strategic

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nature, under which the customs authorities seized bubble memory circuits imported from the USA for export to the USSR via Luxembourg, was regarded as justifiable. Protection of health and life of humans, animals and plants The protection of health and life of humans, animals and plants is the ground of justification most relied on by Member States, and the Court itself has acknowledged, in Case C-170/04 Rosengren and others v Riksåklagaren [2007] ECR I-4071, that … the health and life of humans rank foremost among the assets or interests protected by Article [36 TFEU] and it is for the Member States, within the limits imposed by the Treaty, to decide what degree of protection they wish to assure … (para 39) The Court accepts that, in the absence of European harmonisation, Member States enjoy a certain degree of discretion with regard to the protection of public health. However, to be successfully justified under this heading, the national measure taken to control the movement of goods must be part of a seriously considered and coherent health policy. When exercising its supervision the Court will proceed in two stages. First, the Court will determine whether the protection of public health is the real purpose behind the Member State’s action, or whether it is designed to protect domestic products (Re Newcastle Disease – Import of Poultry Meat, 14.2.1.1 above). In Case 124/81 Commission v UK (Re UHT Milk) [1983] ECR 203, a UK measure, requiring that all domestic and imported milk be packaged and sold through approved dairies or distributors, was deemed to be a MHEE. Its effect was that imported milk had to be repackaged, thus increasing its costs. The Court rejected the claim by the UK Government that the measure was designed to ensure the milk was free from infection. The Court held that the evidence was that milk in all Member States was subject to similar controls and was of similar quality. Therefore the measure could not be justified on grounds of public health. By contrast, in Case C-67/97 Criminal Proceedings against Bluhme [1998] ECR I8033, the Court accepted that a Danish law forbidding the importation into and the keeping of any species of bees on the island of Læso, in order to protect a very special type of indigenous brown bee (Apis mellifera mellifera) and ensure it would not be endangered by crossbreeding, was a measure that contributed to the maintenance of biodiversity by preserving a rare and threatened species and, as such, fell within the protection of the health and life of animals under Article 36 (para 33). Secondly, the Court will consider whether a claim is justified in the absence of a consensus on the scientific or medical impact of certain substances. In Case 53/80 Officier van justitie v Koninklijke Kaasfabriek Eyssen BV [1981] ECR 409, which concerned the compatibility with the Treaty of a Dutch law prohibiting the use of the preservative nisin in processed cheese, the ECJ held that the Dutch authorities did not have to prove conclusively that there was a risk to public health, and that the Dutch prohibition was justified by the fact that the risk was known and an established possibility. Indeed the Court recognised that it was not disputed that ‘the addition of preservatives to foodstuffs … call[ed] for the adoption of national measures designed to regulate the use of such additives in the interest of the protection of human health’, and that the use of nisin in milk and other processed food products … has revealed the need, both at national level in certain countries and at international level, to study the problem of the risk which the consumption of

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products containing the substance presents, or may present, to human health and has led certain international organisations … to undertake research into the critical threshold for the intake of that additive. (para 13) However, the Court observed that ‘those studies [had] not as yet enabled absolutely certain conclusions to be drawn regarding the maximum quantity of nisin which a person may consume daily without serious risk to his health’ (para 13), and concluded that [t]he difficulties and uncertainties inherent in such an assessment may explain the lack of uniformity in the national laws of the Member States regarding the use of this preservative and at the same time justify the limited scope which the prohibition of the use of the additive in a given product, such as processed cheese, has in certain Member States, including the Netherlands, which prohibit its use in products intended for sale on the domestic market while permitting it in products intended for export to other Member States where the requirements for the protection of human health are assessed differently according to dietary habits of their own population. (para 14) This approach was confirmed in the Case 174/82 Criminal proceedings against Sandoz [1983] ECR 2445, where the Dutch authorities refused to grant authorisation for the importation of muesli bars with added vitamins from Germany where they were lawfully marketed. While vitamins are not harmful substances per se, and are rather recognised as necessary for the human body, the Court observed that ‘excessive consumption of them over a prolonged period may have harmful effects, the extent of which varies according to the type of vitamin: there is generally a greater risk with vitamins soluble in fat than with those soluble in water’ (para 11). However, as ‘scientific research does not appear to be sufficiently advanced to be able to determine with certainty the critical quantities and the precise effects’ (para 11), the Court concluded that … 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 [Union]. (para 16) In another vitamins case (Case C-192/01 Commission v Denmark [2003] ECR I9693), the Danish Government tried to justify, on the basis of the Sandoz ruling, an administrative practice prohibiting the marketing of foodstuffs with added vitamins lawfully produced or marketed in other Member States, unless it was demonstrated that such vitamin enrichment met a nutritional need in Danish consumers. In line with Sandoz, the Court observed that as long as ‘scientific uncertainty persists as regards the existence or extent of real risks to human health’, and provided the risk assessment is not based on purely hypothetical considerations, ‘it must be accepted that a Member State may, in accordance with the precautionary principle, take protective measures without having to wait until the reality and seriousness of those risks are fully demonstrated’ (para 49). The Court further asserted that [w]here it proves to be impossible to determine with certainty the existence or extent of the alleged risk because of the insufficiency, inconclusiveness or imprecision of the results of studies conducted, but the likelihood of real harm to

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public health persists should the risk materialise, the precautionary principle justifies the adoption of restrictive measures … (para 52) However, the Court disagreed with the Danish Government’s interpretation of the Sandoz judgment, and ruled that while ‘the criterion of the nutritional need of the population of a Member State can play a role in its detailed assessment of the risk which the addition of nutrients to foodstuffs may pose for public health’ (para 54), a total prohibition cannot be justified under Article 36 TFEU on the sole basis of the absence of such a need. For that reason, the Court regarded the Danish administrative practice as disproportionate (see para 55). Provided they satisfy the proportionality test (see 14.2.1.1 above), national laws on the production and marketing of medicinal products are generally considered favourably in the case law of the Court. For instance, in Joined Cases 266 and 267/87 R v Royal Pharmaceutical Society of Great Britain [1989] ECR 1295, the rules in the Code of Ethics and Guidance Notes of the Pharmaceutical Society of Great Britain, prohibiting a pharmacist from substituting, except in an emergency, any other medicinal product for a product specifically named in the prescription, even if he believed that the former product had identical therapeutic effect and quality, were regarded as justified under Article 36 of the Treaty. By contrast, a French Decree that imposed an obligation to state the registration number of medical reagents on their external packaging, and to mention that registration on the notice accompanying the reagents, ie chemical or biological substances specially prepared for use in vitro for medical biological analyses, was not regarded as satisfying the proportionality test, as [m]entioning the registration, in particular by stating the registration number, merely guarantees the user that the reagent has been registered with the competent authorities, and does not provide any additional information which might effectively protect public health … (Case C-55/99 Commission v France [2000] ECR I-11499, para 43) The advertising of imported medicinal products has also been the object of national regulation. A national prohibition on the sale by mail order of medicinal products that may be sold only in pharmacies in the Member State of import is a MHEE, but may be justified if the prohibition covers medicinal products subject to prescription. However, an absolute prohibition on the sale by mail order of medicinal products that are not subject to prescription in the Member State of import cannot be justified (Case C-322/ 01 Deutscher Apothekerverband eV v 0800 DocMorris NV and Waterval [2003] ECR I14887). By contrast, in Case C-143/06 Ludwigs-Apotheke München Internationale Apotheke v Juers Pharma Import-Export GmbH [2007] ECR I-9623, the Court ruled that a German law prohibiting all advertising of medicinal products not approved in Germany but lawfully put into circulation in another State, products which are acquired in that State by pharmacists in small quantities in response to individual orders, was deemed to be in breach of former Articles 28 and 30 TEC (now Articles 34 and 36 TFEU) on the ground that the importation of those products was ‘authorised only on an exceptional basis, which contain[ed] no information other than that concerning the trade name, packaging size, dose and price’ (para 44), and could not be justified on grounds of the protection of the health and life of humans (para 42). The distinction between medicinal and food products has become a key issue in this context. It is particularly well illustrated in Case C-319/05 Commission v Germany [2007] ECR I-9811, regarding the regulation of the marketing of a garlic preparation in capsule form, legally marketed as a food supplement in a number of Member States but

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classified as a medicinal product in Germany under Directive 2001/83/EC ([2001] OJ L311/67) and, as such, as subject to a marketing authorisation. The Court noted, first, that the main purpose of this Directive was to remove obstacles to trade in medicinal products within the single market, but it did not constitute complete harmonisation of national legislation on the production and marketing of those products. As a result, ‘the fact that a product is classified as a foodstuff in another Member State cannot prevent it from being classified as a medicinal product in the Member State of importation, if it displays the characteristics of such a product’ (para 37). Following an examination of the garlic preparation under Directive 2001/83/EC, the Court then concluded that it did not satisfy the definition of ‘medicinal product by presentation’, as it was ‘not indicated or recommended as a product for treating or preventing disease, whether on the label, the information printed on the external packaging, or in any other way’ (para 45). Nor did it satisfy the definition of ‘medicinal product by function’, which covers products the pharmacological properties of which have been scientifically observed and which are genuinely designed to make a medical diagnosis or to restore, correct or modify physiological functions. Indeed, the garlic preparation did not have a significant effect on the metabolism, and was not capable of restoring, correcting or modifying physiological functions (see para 68). Carrying on with further scrutiny of the German practice under former Articles 28 and 30 TEC (now Articles 34 and 36 TFEU), the Court ruled that the German reclassification of the garlic preparation as a medicinal product was not based on a ‘detailed assessment of the risks to health’, and making this product subject to a strict marketing authorisation procedure could not be justified. Instead, as the Court suggested, Germany could have ‘prescribed suitable labelling warning consumers of the potential risks related to taking this product’ (para 95). In doing so, it would have complied with the principle of proportionality, and ‘the protection of public health would thus have been ensured without such serious restrictions on the free movement of goods’ (para 95).

se

ca ple In Case C-108/09 Ker-Optika bt v ÀNTSZ Dél-dunántúli Regionális Intézete [2010] ECR Im exa 12213, in the context of sales over the Internet, the Court ruled that Hungarian legislation authorising the sale of contact lenses solely in medical supply shops, and therefore prohibiting the sale of contact lenses via the Internet, was a MHEE that could not be objectively justified, as the objective of ensuring protection of the health of users of contact lenses can be achieved by measures which are less restrictive than those provided for under the legislation at issue in the main proceedings, namely measures which subject to certain restrictions only the first supply of lenses and which require the economic operators concerned to make available a qualified optician to the customer. (para 74) Where a Member State adopts legislation such as the Hungarian law, ‘it exceeds the limits of [its] discretion … and that legislation must therefore go beyond what is necessary to attain the objective the Member State claims to pursue’ (para 75).

Protection of industrial and commercial property Article 36 TFEU also provides for a derogation permitting a national law to protect industrial and commercial property rights (IPRs). It must be noted that under Article 345 TFEU, ‘[t]he Treaties shall in no way prejudice the rules in Member States governing the system of property ownership’. Read jointly, Articles 36 and 345 TFEU

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appear to ensure that national rules regarding industrial and commercial property rights are not affected by Articles 34 and 35 of the Treaty. The notion of ‘industrial and commercial property’ in Article 36 TFEU is a very broad one and covers rights over an invention (patents), a design and a brand (trade marks). It also covers literary or artistic work (copyrights) (Joined Cases 55 and 57/80 Musik-Vertrieb membran GmbH and K-tel International v GEMA [1981] ECR 147), a breeder’s right over a new plant variety (Case 258/78 LC Nungesser KG and Eisele v Commission [1982] ECR 2015), and product names (Case C-220/98 Estée Lauder Cosmetics GmbH & Co OHG v Lancaster Group GmbH [2000] ECR I-117) as well as protected designations of origins (Case C-388/95 Belgium v Spain [2000] ECR I-3123, on the prohibition on selling and exporting Rioja ‘denominación de origen calificada’ wine in bulk (see 13.2.4); Case C-108/01 Consorzio del Prosciutto di Parma and Salumificio S Rita SpA v Asda Stores Ltd and Hygrade Foods Ltd [2003] ECR I-512, regarding the slicing and packaging of Parma ham in the region of production; Case C478/07 Budejovický Budvar, národní podnik v Rudolf Ammersin GmbH [2009] ECR I7721, concerning the designation ‘Bud’ and the use of the mark ‘American Bud’). All in all, Article 36 TFEU covers all intellectual property rights. However, the issue is that IPRs can be in direct conflict with the free movement of goods and free competition, in that: (a) such rights are territorial in nature and application (normally within a Member State). National systems of IPRs in a Member State can therefore result in the EU single market’s being divided into 28 separate markets for IPR purposes. Furthermore, IPRs sometimes last for long periods, giving the IPR owner monopoly rights to exploit it, thus potentially perpetuating the separation of markets within the EU. This can clearly conflict with the idea of a single market throughout the EU (see Chapter 11); (b) this exclusive, monopoly right to exploit an IPR can undermine the objectives of free competition (see Chapter 16) within the single market. As the TFEU does not deal with or attempt to resolve this conflict, the ECJ has tried to achieve a balance between the following two conflicting objectives: (a) allowing IPRs to act as an incentive for individuals and enterprises to invest in research and development to develop new products, by giving them certain exclusive rights; and, on the other hand, (b) preventing the use of IPRs with the effect of undermining the economic objectives of free movement of goods and free competition within the EU. Most problems have resulted from ‘parallel imports’. Such situation occurs when: • X owns the IPR to certain goods in Member State 1 and Member State 2 • X sells goods in Member State 1 for less than he sells the goods in Member State 2, because consumers in Member State 2 are prepared to pay more than consumers in Member State 1 • X sells goods in Member State 1 to Y, who wants to export them to (import them into) Member State 2 and resell them for less than X sells the goods in Member State 2, but at a profit compared to what Y paid for them in Member State 1 • X attempts to enforce its IPR in Member State 2, to try to prevent Y from selling in Member State 2.

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The question is whether X should be allowed to enforce his IPR in Member State 2 where the effect is to prevent the free movement of goods between Member State 1 and Member State 2 by Y, and free competition in the goods between X and Y within Member State 2. The exploitation of (or reliance on) IPRs has been controlled and restricted by the ECJ in two broad ways: (a) first, by applying Article 101 TFEU (see 17.2) to prevent the enforcement of an IPR within a potentially anti-competitive agreement. For example, the owner of an IPR purports to enter into an agreement (eg, a licence) with a licensee, giving the licensee absolute territorial protection in the distribution of the goods in a particular Member State (see Joined Cases 56 and 58/64 Établissements Consten SàRL and Grundig-Verkaufs-GmbH v Commission [1966] ECR 299, in which the Court ruled that the use of an IPR in this way was capable of being (and, on facts, was) a breach of competition rules (at 345)); and (b) secondly, by applying Article 34 TFEU to prevent the enforcement of an IPR where there is no agreement caught under Article 101 TFEU. In order to tackle the issue of parallel imports, the ECJ resorted to the principle of ‘exhaustion of rights’, as in Case 78/70 Deutsche Grammophon Gesellschaft mbH v Metro-SB-Großmärkte GmbH & Co KG [1971] ECR 487. The ‘exhaustion of rights’ principle permits the existence of a national IPR, but only its limited exercise, at which point the right is said to be exhausted and no further exercise of it will be permitted. The analysis of the ECJ is as follows: (a) The protection given by a national IPR is compatible with Article 34 TFEU only to the extent that it is permitted by Article 36 TFEU. A national IPR rule is a distinctly applicable MHEE within the Dassonville formula (see 13.2.3.1) in so far as it prevents imports (or certainly makes imports more difficult), unless the exercise of the IPR is justified under the Article 36 TFEU derogation for the protection of industrial and commercial property. (b) Article 36 TFEU permits restrictions on the free movement of goods caused by the enforcement of an IPR only to the extent that they are justified for enforcing rights that are the specific subject matter of such an IPR. The national IPR rule will be permitted if proportionate and necessary to achieve the objective of protection of industrial property (see Deutsche Grammophon Gesellschaft, para 11). (c) The ECJ shall decide what rights are the ‘specific subject matter’ of each type of IPR, that is, which IPR is capable of being protected under Article 36 TFEU, and the extent of their protection. For instance, in Case 15/74 Centrafarm BV and de Peijper v Sterling Drug Inc [1974] ECR 1147, the subject matter of a patent was … the guarantee that the patentee, to reward the creative effort of the inventor, has the exclusive right to use an invention with a view to manufacturing industrial products and putting them into circulation for the first time, either directly or by the grant of licences to third parties, as well as the right to oppose infringements. (para 9) (d) The right being the ‘specific subject matter’ of the IPR exists, but can be exercised only until such right has been exhausted. Therefore, there is a distinction between the existence of a national IPR (permitted by Article 36 TFEU) and the exercise of

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such IPR (the exercise of the right being prohibited once the right has been exhausted). (e) As such, an IPR is protected within the territorial monopoly granted under a national law, but only to the extent that the relevant good, to which the IPR applies, has been lawfully put onto the market in one Member State in accordance with the national IPR by the IPR owner, or by anyone else with the owner’s consent. Once the goods have been put on the market of one Member State by, or with the consent of, the owner, it would no longer be justified for the owner of the IPR to try to enforce the national IPR further in another Member State to protect the ‘specific subject matter’ of that IPR (see, in the context of patents, Centrafarm, above, para 11). Therefore, any further exercise of an IPR in the Member State of sale or any other Member State, will be prohibited under Article 34 TFEU and unjustifiable under Article 36 TFEU (see Case 187/80 Merck & Co Inc v Stephar BV and Exler [1980] ECR 2063, para 14). (f) The principle of exhaustion of rights can be mitigated, however. For instance, in the case of trade marks, an IPR owner can object to its use by a third person in order to prevent counterfeiting or confusion amongst consumers. In the context of a coffee trade mark, the ECJ ruled that a company that was the owner of a trade mark protected in a Member State, could oppose the importation from another Member State of similar goods lawfully bearing in the latter State an identical trade mark, or one which would be liable to be confused with the protected mark, even if the mark under which the goods were imported originally belonged to a subsidiary of the company that opposed the importation and was acquired by a third company after the expropriation of that subsidiary (Case 192/73 Van Zuylen frères v Hag AG (Hag I) [1974] ECR 731 and Case C-10/89 SA CNL-SUCAL NV v HAG GF AG (Hag II) [1990] ECR I-3711). Similarly, a subsidiary trading in Member State A of a car manufacturer established in a Member State B, could be prevented from using the mark ‘Quadra’ for a four-wheel-drive car in its own State and elsewhere, on the ground that another car manufacturer has a trade mark right to use ‘Quattro’ in Member State A, even if this word has a numerical connotation, the meaning of which is discernible in other Member States (Case C317/91 Deutsche Renault AG v AUDI AG [1993] ECR I-6227).

14.2.2 Derogations under Article 114 TFEU Article 114(1) TFEU provides: Save where otherwise provided in the Treaties, the following provisions shall apply for the achievement of the objectives set out in Article 26. The European Parliament and the Council shall, acting in accordance with the ordinary legislative procedure and after consulting the Economic and Social Committee, adopt the measures for the approximation of the provisions laid down by law, regulation or administrative action in Member States which have as their object the establishment and functioning of the internal market. Harmonisation directives (see 11.3) are adopted in Council by qualified majority voting under Article 114(1) TFEU, except for fiscal provisions and those relating to the free movement of persons, and to the rights and interests of employed persons (Article 114(2) TFEU). In the fields of health, safety, environmental protection and consumer protection, harmonisation directives must take ‘as a base a high level of protection, taking account in particular of any new development based on scientific facts’ (Article

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114(3) TFEU). A directive may include a safeguard clause, which authorises a Member State to take provisional measures for non-economic reasons under Article 36 TFEU and subject to a Union control procedure (Article 114(10) TFEU). Article 36 TFEU Scope of application Article 36 may justify breaches of Articles 34 and 35 TFEU only 7/68 Commission v Italy (Re Art Treasures) Article 36 provides only limited discretion to derogate from the principle of FMG 153/78 Commission v Germany Article 36 list of derogations is exhaustive 229/83 Edouard Leclerc Article 36 derogations are interpreted restrictively 113/80 Commission v Ireland

Conditions of application The national measure must not constitute 'arbitrary discrimination' 152/78 Commission v France (Re Advertising of Alcohols) The national measure must not be a 'disguised restriction' on trade 40/72 Commission v UK (Re Newcastle Disease) The national measure must be necessary to protect the objective pursued C-170/07 Commission v Poland (ReTechnical controls on cars)

Grounds for justification Public morality

Public policy 7/78 R v Thompson Public security 72/83Campus Oil Protection of health and life of humans, animals and plants 40/72 Commission v UK (Re Newcastle Disease) 174/72 Sandoz C-67/97Ditle v Bluhme

Article 36 does not protect economic interests 72/83 Campus Oil

The national measure must be proportionate to the objective pursued C-421/09 Humanplasma

Protection of industrial and commercial property 70/78Deutsche Grammophon C-317/91 Deutsche Renault AG v Audi

Article 36 is operative only in the absence of EU harmonisation measures 197/08 Commission v France

The national measure must be the least restrictive possible 261/81 Rau v De Smedt

Protection of national treasures possessing artistic, historic or archeological value FMG = free movement of goods

Figure 14.1 Article 36 TFEU

After the adoption of a directive, a Member State may maintain national provisions for non-economic reasons under Article 36 TFEU, or for the protection of the environment or the working environment, in which case the Member State must notify the Commission of these provisions (Article 114(4) TFEU).

14.3 Justifications in the case law of the Court of Justice 14.3.1 The first Cassis de Dijon principle The concept of ‘mandatory requirements’ (also referred to as ‘imperative requirements’ or ‘overriding requirements in the public interest’) was first mentioned in the Cassis de Dijon case (Case 120/78 Rewe-Zentral AG v Bundesmonopolverwaltung

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für Branntwein [1979] ECR 649 (see 13.2.3.2). After establishing the principle of mutual recognition, and after pointing out that [i]n the absence of common rules relating to the production and marketing of alcohol … it is for the Member States to regulate all matters relating to the production and marketing of alcohol and alcoholic beverages on their own territory … (para 8) the Court confirmed for the first time that, outside the scope of application of Article 36 TFEU, [o]bstacles to movement within the Community resulting from disparities between the national laws relating to the marketing of the products in question must be accepted in so far as those provisions may be recognised as being necessary in order to satisfy mandatory requirements relating in particular to the effectiveness of fiscal supervision, the protection of public health, the fairness of commercial transactions and the defence of the consumer. (para 8) This is known as the first Cassis de Dijon principle. 14.3.1.1

Legal basis of ‘mandatory requirements’ This category of justifications cannot be legally based on Article 36 TFEU, by reason of the very wording of that provision and its restrictive interpretation by the Court. Indeed, the Court had consistently held that the list of derogations contained in Article 36 is exhaustive (see 14.2.1.1 and Re Irish Souvenirs, paras 7–8). As a result, mandatory requirements can only be raised under Article 34 TFEU, in spite of the fact that Article 34 merely lays down a general principle prohibiting quantitative restrictions and MHEEs, without explicitly providing for exceptions to this principle. Consequently, if justified by a mandatory requirement, a trade barrier will not be regarded as a MHEE in the first place since it will then fall outside the scope of Article 34 TFEU. By contrast, a national measure that is justified under Article 36 will first be regarded as a MHEE since it falls within the scope of Article 34. The first Cassis de Dijon principle acts therefore as a ‘rule of reason’, in the sense that it softens the harshness of the prohibitive principle laid down in Article 34 TFEU. It is to be noted, however, that the Court of Justice has never referred to this rule as such in its case law.

14.3.1.2

Relationship between the first Cassis de Dijon principle and Article 36 TFEU While distinctly applicable measures (applying to imported goods only, or applying differently to imports) (see 13.2.3.3) can only be justified under Article 36 TFEU, as they are discriminatory by nature, indistinctly applicable measures (applying equally to both domestic and imported goods without prima facie discrimination) (see 13.2.3.3) can be justified either under Article 36, or under the first Cassis de Dijon principle. This is well illustrated by Re Irish Souvenirs (see 14.2.1.1), which concerned an Irish requirement that only ‘Irish’ souvenirs produced outside of Ireland had to be marked ‘foreign’ or with the country of their origin. The Irish Government did not dispute that the measure was in breach of the free movement of goods provision, but it argued that it was necessary to protect consumers and the fairness of commercial transactions (two mandatory requirements) by distinguishing ‘genuine’ Irish souvenirs from those made abroad. Observing that the Irish measure was only applied to imported goods, the Court ruled that it could not be justified under the first Cassis de Dijon principle. The measure could not be justified under Article 36 TEEC (now Article 36 TFEU) either, as

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the two grounds for justification relied upon by the Irish Government were not included in that provision. The Court concluded that the requirement was a MHEE. However, as with Article 36 derogations, Member States can rely upon mandatory requirements only in the absence of EU measures of harmonisation (see 14.2.1.1) (Case C-470/93 Verein gegen Unwesen in Handel und Gewerbe Köln eV v Mars GmbH [1995] ECR I-1923, para 12), and provided that their measures satisfy the proportionality test. In the Cassis de Dijon case, the German Government had argued that the minimum alcohol content of 32% for certain spirits, whether domestic or imported, imposed under the Branntweinmonopolgesetz, was a necessary measure for the protection of consumers – since low-alcohol drinks might easily induce alcohol tolerance – and for guaranteeing fairness of commercial transactions – since cheaper, lower-strength alcohol might force manufacturers to reduce the alcohol content in their own beverages owing to competitive pressures from imported lower-alcohol drinks (para 12). The ECJ rejected Germany’s arguments. The German measure was deemed disproportionate, since the protection of the consumer could have been achieved by national measures much less restrictive on imports, such as an effective labelling. In order for a national measure to be justified, the Member State must therefore show that its measure: (a) has as its sole purpose to satisfy a mandatory requirement; (b) is part of a serious and coherent policy to meet that identified mandatory requirement; and (c) is ‘reasonably necessary’ (proportionate) to the purpose of the measure (the identified mandatory requirement).

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ca ple In Case 178/84 Commission v Germany (Re Law of Purity of Beer) [1987] ECR 1227, the xam e Commission brought an enforcement action against Germany for prohibiting the marketing of beers, lawfully manufactured and marketed in other Member States, if they did not comply with Articles 9 and 10 of the Biersteuergesetz (Law on beer duty). This law covered manufacturing rules (Article 9), which applied only to breweries in Germany, and rules on the use of the designation ‘Bier’ (beer) (Article 10), which applied both to beer brewed in Germany and to imported beer. The manufacturing rules notably provided that bottom-fermented beers could be manufactured only from malted barley, hops, yeast and water, according to the old German tradition of the Reinheitsgebot (purity of beer). And, under Article 10, only fermented beverages satisfying the requirements set out in Article 9 of the Biersteuergesetz could be marketed under the designation ‘Bier’. Furthermore, imported beers containing additives would face an absolute prohibition on marketing under the Law on foodstuffs, tobacco products, cosmetics and other consumer goods. The German Government tried to justify those rules on the ground of the protection of consumers (mandatory requirement) and the protection of human health (under the then Article 36 TEEC (now Article 36 TFEU)). The Court rejected the first argument on the ground that … consumers’ conceptions which vary from one Member State to the other are also likely to evolve in the course of time within a Member State. The establishment of the [internal] market is, it should be added, one of the factors that may play a major contributory role in that development. Whereas rules protecting consumers against misleading practices enable such a development to be taken into account, legislation of the kind contained in Article 10 of the Biersteuergesetz prevents it from taking place. As the Court has already held in another context …, the legislation of a Member State must not ‘crystallize given consumer habits so as to consolidate an advantage acquired by national industries concerned to comply with them’. (para 32, emphasis added)

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Furthermore with regard to the designation ‘Bier’, the Court pointed out: It is admittedly legitimate to seek to enable consumers who attribute specific qualities to beers manufactured from particular raw materials to make their choice in the light of that consideration. However …, that possibility may be ensured by means which do not prevent the importation of products which have been lawfully manufactured and marketed in other Member States and, in particular, ‘by the compulsory affixing of suitable labels giving the nature of the product sold’. By indicating the raw materials utilised in the manufacture of beer ‘such a course would enable the consumer to make his choice in full knowledge of the facts and would guarantee transparency in trading and in offers to the public’. It must be added that such a system of mandatory consumer information must not entail negative assessments for beers not complying with the requirements of Article 9 of the Biersteuergesetz. (para 35, emphasis added). Following the Commission, the Court also rejected the second argument, and ruled that an absolute ban on the marketing of beers containing additives could not be justified on protection of human health grounds under Article 36 TEEC (now Article 36 TFEU). The Court observed that … it appears from the tables of additives authorised for use in the various foodstuffs submitted by the German Government itself that some of the additives authorised in other Member States for use in the manufacture of beer are also authorised under the German rules, in particular the Regulation on Additives, for use in the manufacture of all, or virtually all, beverages. Mere reference to the potential risks of the ingestion of additives in general and to the fact that beer is a foodstuff consumed in large quantities does not suffice to justify the imposition of stricter rules in the case of beer. (para 49, emphasis added) Dismissing as a ‘disguised means of restricting trade between Member States’ (para 51) a further argument by Germany relating to the lack of technological need for additives in beer, the Court concluded that … in so far as the German rules on additives in beer entail a general ban on additives, their application to beers imported from other Member States is contrary to the requirements of [EU] law as laid down in the case law of the Court, since that prohibition is contrary to the principle of proportionality and is therefore not covered by the exception provided for in Article [36 TFEU]. (para 53)

14.3.1.3

‘Mandatory requirements’ If the list of derogations under Article 36 TFEU is exhaustive, that of mandatory requirements is not, as suggested by the words ‘in particular’ in paragraph 8 of the Cassis de Dijon case (see 14.3.1). The original paragraph 8 list of mandatory requirements has subsequently been expanded by the Court of Justice so as to include: • the improvement of working conditions (Case 155/80 Summary Proceedings against Oebel [1981] ECR 1993, a German rule prohibiting delivery of bakery products to consumers and retailers during the night and before 4 am) • protection of the environment (Case 302/86 Commission v Denmark [1988] ECR 649, a Danish law requiring all containers for beer and soft drinks to be returnable, Case C-320/03 R Commission v Austria [2005] ECR I-7929, an Austrian law prohibiting lorries weighing more than 7.5 tonnes from being driven on a section of the A12 motorway in the Inn Valley, to improve air quality so as to ensure lasting protection of human, animal and plant health, and Case C-573/12 Ålands vindkraft AB v Energimyndigheten EU:C:2014:2037, a Swedish support scheme falling within the scope of the Renewable Energy Directive for promoting green energy production in the national territory – the scheme was deemed capable of

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•

•

•

•

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hindering imports of electricity from other Member States, especially green electricity since suppliers and users were required to purchase certificates in proportion to the electricity that they imported if they wished to avoid having to pay a specific fee, yet the restriction was justified by the public interest objective of promoting the use of renewable energy sources in order to protect the environment and combat climate change) the maintenance of press diversity (Case C-368/95 Vereinigte Familiapress Zeitungsverlags- und vertriebs GmbH v Heinrich Bauer Verlag [1997] ECR I-3689, a German newspaper publisher selling newspapers in Germany and Austria, in which readers were offered the opportunity to take part in games with prizes, was accused of acting in breach of the Austrian Unfair Competition Act 1992) protection of the cinema industry as a form of cultural expression (Joined Cases 60 and 61/84 Cinéthèque SA and others v Fédération nationale des cinémas français [1985] ECR 2605, a French law prohibiting the sale or hire of films within a year of their first showing in cinema theatres, thus restricting the import of videos from other Member States) protection of a national social security system (Case C-120/95 Decker v Caisse de maladie des employés privés [1998] ECR I-1831, prior authorisation requirement from a Luxembourg competent social security institution before reimbursement of costs for glasses purchased in another Member State) protection of national or regional socio-cultural characteristics (Case C-145/88 Torfaen Borough Council v B & Q plc [1989] ECR 3851, concerning the compatibility with Article 30 TEEC of the Shops Act 1950 prohibiting Sunday trading – note that such a rule would now be caught under the Keck ruling, see 13.2.3.4).

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ca ple See Case C-639/11 Commission v Poland EU:C:2014:173 and Case C-61/12 Commission m exa v Lithuania (Re Obligation, for the purpose of registration, to reposition to the left-hand side the steering equipment of passenger vehicles positioned on the right-hand side) EU:C:2014:172. Over recent years, the Commission had received a series of complaints from Polish and Lithuanian citizens, who exercised a professional activity in the United Kingdom and Ireland and who had bought a passenger vehicle there. On their return to Poland and to Lithuania they wanted to register their vehicles, but were obliged, under Polish and Lithuanian legislation, to reposition the steering-wheel of their vehicle on the left-hand side. Such modification can be very complicated. The Commission considered that such a requirement amounted to a prohibition on registration in Poland and Lithuania of vehicles with the steering-wheel positioned on the right, and that the refusal to register those vehicle constituted, with regard to new vehicles, an infringement of Article 4(3) of Directive 2007/46/EC ([2007] OJ L263/1) and of Article 2a of Directive 70/311/EEC ([1970] OJ L133/10), which require national authorities to register new vehicles irrespective of the position of the steering-wheel. The refusal also constituted an infringement of Article 34 TFEU with regard to vehicles that had been registered in another Member State. The Commission invited those two States to terminate those infringements and, following the pre-litigation procedure under Article 258 TFEU, it decided to bring an action against them in the Court of Justice. With regard to Article 34 TFEU, relying on the Dassonville and Cassis de Dijon rulings, and on the ruling in Case C-110/05 Commission v Italy (Re Trailer) [2009] ECR I-519, the Court found that the Polish and Lithuanian laws constituted … measure[s] having equivalent effect to quantitative restrictions on imports …, in so far as [their] effect [was] to hinder access to the [Polish and Lithuanian] market[s] for vehicles with steering equipment on the right, which are lawfully constructed and registered in Member States other than [Poland and Lithuania] … (para 52 and para 57 respectively)

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However, these laws could be justified in order to satisfy imperative requirements, ‘on condition that [they were] appropriate for securing the attainment of the objective pursued and that [they did] not go beyond what is necessary in order to attain that objective’ (para 53 and para 58 respectively). Following an examination of the justification put forward by Poland and Lithuania, namely the need to ensure road safety, which constitutes an imperative requirement relating to the public interest, the Court held that it did not appear that the national measures concerned could be considered to be necessary to attain the objective pursued, and that they were not compatible with the principle of proportionality. (para 64 and para 69 respectively) First Cassis de Dijon principle (para 8) Mandatory requirements (imperative or overriding requirements in the public interest) Scope of application Fall outside the scope of application of Article 36 TFEU Act as a ‘rule of reason’ in the application of Article 34 TFEU List of mandatory requirements is not exhaustive

Examples of mandatory requirements Effectiveness of local supervision Protection of public health Fairness of commercial transaction Defence of the consumers Cassis de Dijon

Can justify only indistinctly applicable measures 113/80 Commission v Ireland (Re Irish Souvenirs)

Protection of the environment 302/86 Commission v Denmark C-320/03 Commission v Austria C-573/12 Ålands vindkraft

The first Cassis de Dijon principle is operative only in the absence of EU harmonisation measures C-470/93 Mars GmbH

Improvement of working conditions 155/80 Oebel

The national measure justified by a mandatory requirement must satisfy the proportionality test Cassis de Dijon 174/84 Commission v Germany (Re Law on Beer purity)

Maintenance of press diversity C-368/95 Familiapress Protection of the cinema industry 60 and 61/84 Cinéthèque SA Protection of national or regional socio-cultural characteristics 145/88 Torfaen Borough Council v B&Q Road safety C-639/11 Commission v Poland C-61/12 Commission v Lithuania

Figure 14.2 Mandatory requirements

14.3.2 Principles of law Enshrined in primary legislation, the precautionary principle (Article 191(2) TFEU) and the protection of fundamental rights (Article 6(3) TEU) have also been incorporated and interpreted by the Court of Justice to justify certain restrictions on the free movement of goods.

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The precautionary principle Originating in environmental law and first introduced by the Maastricht Treaty, the precautionary principle was rapidly extended to the free movement of goods through the concept of protection of public health. Unlike the preventive principle, the precautionary principle presupposes only some uncertainty as to the existence or extent of risks to human health. It was in the late 1990s, following the BSE or ‘mad cow disease’ crisis, that the precautionary principle first appeared in order to justify limits to the free movement of goods. Yet it was not in the first BSE case (Case C-180/96 United Kingdom v Commission [1998] ECR I-2265, where the UK sought the annulment of Commission Decision 96/239/EC of 27 March 1996 on emergency measures to protect against bovine spongiform encephalopathy, effectively banning all exports from the UK of all bovine animals and derived products to the EU and third countries) but in the second one that the principle was raised. While in the former case the Court simply justified the ban imposed by the Commission on the export of British beef on the ’risks regarded as a serious hazard to public health’ posed by BSE-infected products, without the need to refer explicitly to the precautionary principle, in Case C-1/00 Commission v France [2001] ECR I-9989, the Court rejected the argument of the French Government, based on the precautionary principle, to justify the Government’s refusal to comply with the Commission’s decisions lifting the ban on British beef. The precautionary principle was also raised with regard to genetically modified organisms (GMOs) and their presence in certain foodstuffs. In Case C-132/03 Ministero della Salute v Codacons and Federconsumatori [2005] ECR I-4167, an Italian decree provided that the presence of GMOs in a proportion not exceeding 1% of the ingredients making up baby foods, caused by adventitious contamination, needed not be indicated on the labelling of such food and formulae. The issue was whether the decree was covered by the exemption from the obligation to state on the labelling of foodstuffs that material derived from certain GMOs was present, under Articles 2(1) and 3 of Council Regulation (EC) No 1139/98 ([1998] OJ L159/4) concerning the compulsory indication on the labelling of certain foodstuffs produced from genetically modified organisms. The Court not only answered in the affirmative, but also stressed that this ‘interpretation [could] not be called into question on the basis of the precautionary principle’ (para 56), as [t]he GMOs to which Regulation No 1139/98 refers can be placed on the market only if they have first been authorised following a risk assessment intended to ensure that, in the light of the conclusions of the assessment, they are safe for the consumer. The precautionary principle, where relevant, is part of such a decisionmaking process … (para 63) The clash between the precautionary principle and the principle of free movement of goods is, however, better and more clearly illustrated in Case C-41/02 Commission v The Netherlands [2004] ECR I-11375, which concerned a Dutch legal prohibition on the marketing of foodstuffs fortified with micronutrients and vitamins. Derogations could be granted by the Health Minister only in the event that the addition did not pose a risk to public health and met an actual nutritional need. After recalling that [EU] law does not … preclude legislation of a Member State prohibiting in accordance with the precautionary principle, save for prior authorisation, the marketing of foodstuffs when nutrients other than those whose addition is lawful under that legislation have been added thereto … (para 44)

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and that, ‘it follows from the case-law of the Court that the precautionary principle may also apply in policy on the protection of human health which, … aims at a high level of protection’ (para 45), the Court ruled that [a] proper application of the precautionary principle requires, in the first place, the identification of the potentially negative consequences for health of the proposed addition of nutrients, and, secondly, 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 it proves to be impossible to determine with certainty the existence or extent of the alleged risk because of the insufficiency, inconclusiveness or imprecision of the results of studies conducted, but the likelihood of real harm to public health persists should the risk materialise, the precautionary principle justifies the adoption of restrictive measures … (paras 53–54) As the Dutch Government failed to produce scientific studies showing that any intake over the recommended daily allowance of any of the nutrients concerned entailed a real risk to public health, the systematic prohibition of the marketing of fortified foodstuffs was regarded as contrary to EU law. 14.3.2.2

Protection of fundamental rights The protection of fundamental rights as a means to justify a limitation on the free movement of goods is best demonstrated in Case C-112/00 Eugen Schmidberger, Internationale Transporte und Planzüge v Austria [2003] ECR I-5659. The Court ruled that the fact that the Austrian authorities did not ban a demonstration on the Brenner motorway, resulting in traffic by road being obstructed ‘on a single route, on a single occasion and during a period of almost 30 hours’, was not to be regarded as a breach of former Article 30 TEC (now Article 36 TFEU). Contrasting this situation with that which arose in the Spanish Strawberries case (see 14.2.1.2), the Court held that the impact on the free movement of goods was limited, and that the inaction of the national authorities was justified on the ground that the demonstrators exercised their legitimate fundamental rights of expression and protest, and that the ‘purpose of that public demonstration was not to restrict trade in goods of a particular type or from a particular source’ (para 86). However, the Court set limits to the challenge of national measures on the ground of fundamental freedoms. In Case C-71/02 Herbert Karner Industrie-Auktionen GmbH v Troostwijk GmbH [2004] ECR I-3025, the UWG, an Austrian law on unfair competition, prohibited retailers from indicating to consumers that goods came from an insolvent estate where they no longer constituted part of that estate. Karner and Troostwijk were two companies that engaged in the sale by auction of industrial goods and the purchase of the stock of insolvent companies. In 2001, Troostwijk acquired the stock of an insolvent construction company in which Karner also showed interest. With a view to selling the goods from the insolvent company in an auction sale to take place a few months later, Troostwijk advertised the auction in a sales catalogue and on the Internet, stating that it was an insolvency auction and that the goods were from the insolvent estate of the company. Karner challenged Troostwijk’s advertising in the Vienna Commercial Court, on the ground that it was contrary to the UWG. On appeal to the Vienna Higher Regional Court, Troostwijk questioned the compatibility of the UWG with former Article 28 TEC and Article 10 ECHR concerning freedom of expression. With regard to the freedom of expression argument, the Court observed:

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It is common ground that the discretion enjoyed by the national authorities in determining the balance to be struck between freedom of expression and the abovementioned objectives varies for each of the goals justifying restrictions on that freedom and depends on the nature of the activities in question. When the exercise of the freedom does not contribute to a discussion of public interest and, in addition, arises in a context in which the Member States have a certain amount of discretion, review is limited to an examination of the reasonableness and proportionality of the interference. This holds true for the commercial use of freedom of expression, particularly in a field as complex and fluctuating as advertising … In this case it appears, having regard to the circumstances of fact and of law characterising the situation which gave rise to the case in the main proceedings and the discretion enjoyed by the Member States, that a restriction on advertising as provided for in Article 30 of the UWG is reasonable and proportionate in the light of the legitimate goals pursued by that provision, namely consumer protection and fair trading. (paras 51–52)

National measure

Quantitative restriction

Directly applicable measure (discriminate in law and in fact) Breach of Article 34 TFEU Justifiable under Article 36 TFEU provided it is proportionate

Measure affecting or prohibiting certain selling arrangements

Measure having equivalent effect Indistinctly applicable measure imposing product requirements (discriminate in fact)

Any other measure (eg, prohibiting or restricting product use) hindering market access

Breach of Article 34 unless it satisfies a mandatory requirement or it is justified under Article 36 TFEU and it is proportionate

Applied equally in law and in fact Yes in law but not in fact

Yes in law and in fact Does it hinder market access? Yes

No

No breach of Article 34 TFEU

Figure 14.3 How a breach of Article 34 TFEU is established

14.4 Further reading Alemanno A, ‘Balancing Free Movement and Public Health: The Case of Minimum Unit Pricing of Alcohol in Scotch Whisky’ (2016) 53 CML Rev 1037.

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Caro De Sousa P, ‘Through Contact Lenses, Darkly: Is Identifying Restrictions to Free Movement Harder than Meets the Eye? Comment on Ker-Optika’ (2012) 37(1) EL Rev 79. Harbo TI, ‘The Function of the Proportionality Principle in EU Law’ (2010) 16(2) European Law Journal 158. Maduro PM, ‘Harmony and Dissonance in Free Movement’ (2001) 4 Cambridge Yearbook of European Legal Studies 315. Oliver P and Enchelmaier S, ‘Free Movement of Goods: Recent Developments in the Case Law’ (2007) 44 CML Rev 649. Schrauwen A, ‘Case C-320/03, Commission v Republic of Austria, Judgment of the Court (Grand Chamber) of 15 November 2005, nyr’ (2006) 43 CML Rev 1447. Weatherill S, ‘Free Movement of Goods’ (2012) 61 ICLQ 541.

Summary

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Unlike custom duties and charges having equivalent effect under Article 30 TFEU, quantitative restrictions and measures having equivalent effect (MHEEs) under Article 34 and 35 TFEU can be expressly justified under Article 36 TFEU. Article 36 provides for an exhaustive list of six non-economic grounds for justification, which can be relied upon by Member States to justify MHEEs, provided the national measures are not discriminatory or disguised restrictions on trade and provided there are no EU harmonisation measures. The Court further requires that the national measure is necessary to protect the identified permitted ground (necessity) and does not go beyond what is necessary to achieve the ground (proportionate). In addition, those derogations are always interpreted strictly by the Court. Later on, in the Cassis de Dijon case, the Court acknowledged that, outside the scope of application of what is now Article 36 TFEU, barriers to trade within the internal market could be accepted in so far as they were deemed necessary to satisfy mandatory requirements. This is known as the first Cassis de Dijon principle. Only national measures that apply indistinctly to imported and national products can be justified under this principle, provided that they satisfy the requirements of necessity and proportionality. Unlike the list of grounds for justification under Article 36 TFEU, the list of mandatory requirements is not limited, and many were created by the Court in addition to the original four Cassis requirements. Finally, the Court has also gradually, albeit in a limited way, accepted that EU principles of law such as the precautionary principle and the protection of fundamental rights can justify national restrictions on trade between Member States.

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Test Your Knowledge

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Spirituality, an (imaginary) EU Member State, seeks to fight alcoholism, bingedrinking and alcohol-related health problems, and envisages taking a number of measures to achieve those objectives. Advise its government on whether the following proposed measures could be justified under either Article 36 TFEU or the first Cassis de Dijon principle: (a) to set a minimum price per unit of alcohol; (b) to prohibit all advertising of alcohol on television or on the radio, and in magazines; (c) to prohibit the use of screw tops on all bottles of alcohol. AutoPlus is a French company that makes components for the European car industry. Should these following national measures be in breach of Article 34 TFEU, AutoPlus seeks your advice as to whether they could be justified under either Article 36 TFEU or the first Cassis de Dijon principle: (a) The customs authorities in Spain insist on unpacking and inspecting all consignments of halogen bulbs for headlights. Because the bulbs are very fragile, many of them get broken during this process, and the importers then refuse to pay AutoPlus for them. (b) The German Government has recently enacted a law requiring all cars sold in Germany to be labelled according to the percentage of German-made components they contain. This was in response to complaints from German trade unions that too many components are being imported. (c) Sweden has enacted a law stating that windscreen wipers on all cars sold in Sweden must be able to operate effectively at a temperature as low as –20°c. AutoPlus’s windscreen wipers are only guaranteed to work at a temperature as low as –10°c.

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Freedom to Exercise an Economic Activity

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Freedom to Exercise an Economic Activity

After reading this chapter, you will be able to understand: • • • • • •

the free of movement of workers and the concept of worker the free movement of the self-employed and the right of establishment the freedom to provide and receive services the principle of equal treatment of workers and the self-employed the principle of mutual recognition of professional qualifications the public service and official authority exceptions to the right of free movement of workers and the self-employed.

15.1 Introduction The right of workers, self-employed persons and legal persons to move and reside freely anywhere within the internal market, with the view to taking up and exercising an economic activity, was recognised in the original Treaty establishing the European Communities. Its objective was indeed to provide economically active persons free access to Member States’ markets. The freedom to exercise an economic activity firmly rests on Treaty provisions relating to the freedom of movement of workers, the right of establishment and the freedom to provide services. Further, the Treaties provide that EU legislation on the mutual recognition of professional qualifications shall be adopted in order to make it easier to take up and exercise an economic activity. This freedom is also reinforced by the principle of non-discrimination on the ground of nationality, a core principle of EU law, which guarantees that EU migrants are accorded equal treatment with the nationals of the host Member State. However, equal treatment does not extend to activities that involve the exercise of powers conferred by public law or of official authority.

15.2 Free movement of workers The right of free movement for workers is guaranteed under Articles 45 to 48 TFEU, and in secondary legislation adopted under Article 46 TFEU with a view to ‘setting out the measures required to bring about the freedom of movement for workers, as defined in Article 45’. Article 45(1) TFEU lays down the basic principle by stating that ‘[f]reedom of movement for workers shall be secured within the Union’. This provision enables any EU national who wishes to take up employment as an employed worker – rather than setting up a business or otherwise providing services as a self-employed person – to do so in any other Member State.

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15.2.1 The concept of worker In the absence of an express definition of the term ‘worker’ in the Treaty or secondary legislation, the European Court of Justice (ECJ) gave a very wide, common European meaning to the concept of worker in order to prevent different and restrictive national interpretations of the term and, hence, give full effect to a fundamental freedom of the EU (Case 53/81 Levin v Staatssecretaris van Justitie [1982] ECR 1035). 15.2.1.1

A European law concept Very early on, in Case 75/63 Hoekstra (née Unger) v Bestuur der Bedrijfsvereniging voor Detailhandel en Ambachten [1964] ECR 178, the Court made it clear that [i]f the definition of [the term worker] were a matter within the competence of national law, it would therefore be possible for each Member State to modify the meaning of the concept of ‘migrant worker’ and to eliminate at will the protection afforded by the Treaty to certain categories of person. (at 184) To allow national law to define and modify this concept unilaterally would deprive the Treaty provisions on the free movement of workers of all effect, and frustrate the objectives of the Treaty in this respect. Noting that the wording of former Articles 48 to 51 of the EEC Treaty (now Articles 45 to 48 TFEU) did not leave the definition of the term ‘worker’ to national legislation, and that former Article 48(2) referred to ‘certain elements of the concept of “workers” such as employment and remuneration’, the Court concluded that those provisions attributed a European meaning to the concept of ‘workers’.

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ca ple In Case 66/85 Lawrie-Blum v Land Baden-Württemberg [1986] ECR 2121, Deborah Lawriexam e Blum, a British national, passed, at the University of Freiburg, the examination for the profession of teacher at a German secondary school. She was refused admission by the Stuttgart Secondary Education Office, however, to the period of preparatory service leading to the Second State Examination, which qualifies successful candidates for appointment as teachers in secondary schools, on the ground of her nationality. During that period of preparatory service, a trainee was regarded as a civil servant and received payment. The issue was whether trainee teachers could be regarded as ‘workers’, even if they give lessons for only a few hours a week and were paid remuneration below the starting salary of a qualified teacher. In this case, the Court defined a worker as a person who is obliged to provide services to another in return for monetary reward and who is subject to the direction or control of the other person as regards the way in which the work is done (para 14). On that basis, a trainee teacher who, under the direction and supervision of the school authorities, is undergoing a period of service in preparation for the teaching profession during which he provides services by giving lessons and receives remuneration must be regarded as a worker. (para 22)

The key feature of an employment relationship is that an individual, engaged in a relationship based on subordination, performs services for and under the direction of another person in return for remuneration (Case C-428/09 Union syndicale Solidaires Isère v Premier ministre and Others EU:C:2010:612, para 28 and Case C-337/10 Neidel v Stadt Frankfurt am Main EU:C:2012:263, para 23). The nature of the employment is therefore a determining factor. Furthermore, to be a worker, an individual must be

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‘engaged in an economic activity’ (Case 36/74 Walrave and Koch v Association Union Cycliste Internationale and others [1974] ECR 1405: the practice of sport is an economic activity when it has the character of gainful employment or remunerated service) that is ‘effective and genuine’, be it on a full- or part-time basis (Levin, 15.2.1 above, para 17), and irrespective of the fact that the level of remuneration is below the minimum level of subsistence and is supplemented by other lawful, privately- or publicly-funded means (Case 139/85 Kempf v Staatssecretaris van Justitie [1986] ECR 1741, para 14). A ‘genuine and effective activity’ could comprise an activity performed by members of a religious community as part of the commercial activities of that community, provided the services offered by the community to its members can be regarded as the ‘indirect quid pro quo for [their] genuine and effective work’ (Case 196/87 Steymann v Staatssecretaris van Justitie [1988] ECR 6159, para 14) or that of persons with mental disabilities placed in a work rehabilitation centre who performed activities within the economic and social programme of the centre in return for remuneration and obtained paid annual leave (Case C-316/13 Fenoll v Centre d’aide par le travail ‘La Jouvene’, Association de parents et d’amis de personnes handicapées mentales (APEI) d’Avignon EU:C:2015:200). A genuine activity excludes one that is ‘on such a small scale as to be regarded as purely marginal and ancillary’, as in Case 344/87 Bettray v Staatssecretaris van Justitie [1989] ECR 1621 (paid activity provided under a Dutch social employment law as a means of rehabilitation or reintegration). The duration of the activities is also a factor that may be taken into account to assess whether those activities are effective and genuine, or rather purely marginal and ancillary. Therefore, ‘a very limited number of hours in a labour relationship may be an indication that the activities exercised are purely marginal and ancillary’ (see Case C-357/89 Raulin v Minister van Onderwijs en Wetenschappen [1992] ECR I-1027, para 14: waitress who worked 60 hours over a period of 16 days under an on-call contract, and Case C-413/01 Ninni-Orasche v Bundesminister für Wissenschaft, Verkehr und Kunst [2003] ECR I-13187). 15.2.1.2

Work seekers Article 45(3)(a) and (b) TFEU give an EU national the right to enter another Member State to ‘accept offers of employment actually made’ and ‘to move freely within [its] territory … for this purpose’, and Article 45(3)(c) gives the right to ‘stay in the Member State for the purpose of employment’. Do these provisions cover an individual who enters another Member State to look for work? According to a strict wording of Article 45(3)(a) and (b), EU nationals would be given the right to move freely to and within another Member State for the purpose only of accepting offers of employment actually made, and, interpreted restrictively, the right to stay in that Member State, under Article 45(3)(c), would be for the purpose of employment only. In Case C-292/89 R v Immigration Appeal Tribunal, ex parte Antonissen [1991] ECR I-745, the ECJ observed that ‘[s]uch an interpretation would exclude the right of a national of a Member State to move freely and to stay in the territory of the other Member States in order to seek employment there, and cannot be upheld’ (para 10). Indeed, a narrow interpretation would render Article 45(3) ineffective, as it ‘would jeopardise the actual chances that a national of a Member State who is seeking employment will find it in another Member State’ (para 12) and, as a result, fewer workers would move between Member States. Therefore, Article 45(3) TFEU must be interpreted as covering work seekers. This interpretation is further corroborated by the wording of Articles 1 and 5 of former

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Regulation 1612/68 (now Regulation (EU) 492/2011 on the Freedom of Movement for Workers within the Union ([2011] OJ L141/1)). The former Regulation refers to the ‘right to take up an activity as an employed person’, and the latter covers more specifically the right of a national of a Member State who seeks employment in the territory of another Member State to ‘receive the same assistance there as that afforded by the employment offices in that State to their own nationals seeking employment’. That being said, the status of a work seeker does not equate fully to that of a worker, as the right of those seeking employment to stay in a Member State may be subject to a reasonable time limit, unless they ‘[provide] evidence that [they are] continuing to seek employment and that [they have] genuine chances of being engaged’ (ex parte Antonissen, para 22). This difference in status was later on enshrined in Article 14(4)(b) of Directive 2004/38/EC ([2004] OJ L158/77), which provides that Union citizens entering another Member State in order to seek employment ‘may not be expelled for as long as the Union citizens can provide evidence that they are continuing to seek employment and that they have a genuine chance of being engaged’. Worker (Art 45 TFEU) A European, autonomous concept 75/63 Hoekstra

Someone who continues to seek work and has a genuine chance of being engaged (work seeker) C-292/89 ex parte Antonissen and Art 14(4)(b) of Directive 2004/38/EC

Someone who provides services to another in return for monetary reward and who is subject to the direction or control of the other person 66/85 Lawrie-Blum ‘engaged in an economic activity’ 36/74 Walgrave 139/85 Kempf 53/81 Levin which is ‘genuine and effective’ 196/87 Steymann and not purely ‘marginal and ancillary’ 344/87 Betray C-357/89 Raulin

Figure 15.1 The concept of ‘worker’

15.2.2 The worker’s rights Under Article 45 TFEU, and subject to the restrictions on grounds of public policy, public security or public health under Article 45(3) (see 20.5), EU nationals have the rights to enter another Member State, and to move and reside freely within it for the purpose of seeking employment or taking up an activity as a worker. Article 45(3)(d) also gives them the right to stay in a Member State after having been employed in that State.

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Article 7(1)(a) of Directive 2004/38/EC further provides that EU migrant workers have a right of residence for more than three months. Should they cease to be workers, their worker status and their right of residence are protected under Article 7(3)(a)–(d) of the Directive. This is the case where: (a) they are unable to work following an illness or accident; (b) they are involuntarily unemployed after more than one year of employment, and have registered as job-seekers (by extension, this provision applies to selfemployed persons who ceased their activities because of a duly recorded absence of work owing to reasons beyond their control and have registered as job-seekers with the relevant employment office of the host Member State; see Case 442/16 Florea Gusa v Minister for Social Protection and Others ECLI:EU:C:2017:1004); (c) they are in involuntary unemployment on completion of a fixed-term employment contract of less than a year’s duration, or during the first 12 months of employment, and have registered as job-seekers. The status of worker can then be retained for no less than six months (see eg Case C-483/17 Neculai Tarola v Minister for Social Protection ECLI:EU:C:2019:309); or (d) they take up vocational training, which, except in the case of involuntary unemployment, must be related to the previous employment for worker status to be retained.

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ca ple In Case C-507/12 Jessy Saint Prix v Secretary of State for Work and Pensions xam e EU:C:2014:2007, Ms Saint Prix, a French national, entered the United Kingdom on 10 July 2006, where she worked as a teaching assistant for a year before enrolling on a PostGraduate Certificate in Education course at the University of London, running from September 2007 until the end of June 2008. During that period she became pregnant and withdrew from the course, registering with an employment agency in the hope of finding work in secondary school. As no work was available, she took agency positions working in nursery schools instead. When she was nearly six months pregnant, she stopped that work because the demands of caring for nursery school children had become too strenuous for her. Three months before her expected date of confinement, Ms Saint Prix claimed income support. Her claim was refused by the Secretary of State by a decision in May 2008, as she did not meet one of the requirements to receive income support, namely, that she had lost her right of residence in the UK. She appealed against that decision before the First Tier Tribunal. In August 2008, three months after the premature birth of her child, Ms Saint Prix resumed work. The case was eventually brought before the Supreme Court. By way of preliminary reference, the Supreme Court asked whether a pregnant woman who had temporarily given up work because of her pregnancy could still be considered a ‘worker’ under Article 45 TFEU and Article 7 of Directive 2004/38/EC. Rejecting the British Government’s argument that Article 7(3) of Directive 2004/38/EC lists exhaustively the circumstances in which a migrant worker who is no longer in employment may retain that status, the Court held that Article 45 TFEU must be interpreted as meaning that a woman who gives up work, or seeking work, because of the physical constraints of the late stages of pregnancy and the aftermath of childbirth retains the status of ‘worker’, within the meaning of that article, provided she returns to work or finds another job within a reasonable period after the birth of her child. (para 47) Note that the same right applies under Article 49 TFEU to a self-employed person (Case C-544/18 Her Majesty’s Revenue and Customs v Henrika Dakneviciute EU:C:2019:761).

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Furthermore, Article 45(2) TFEU and Regulation 492/2011/EU protect workers against any discrimination on the ground of nationality with regard to employment, remuneration and other working conditions. These equal treatment rights are discussed below (15.4).

15.3 Freedom of establishment and freedom to provide services The freedom of establishment and the freedom to provide services are the other two freedoms of movement available to economically active EU migrants.

15.3.1 The concept of establishment According to Article 49, second paragraph TFEU, Freedom of establishment shall include the right to take up and pursue activities as self-employed persons and to set up and manage undertakings, in particular companies or firms … Like the freedom of movement of workers, the freedom of establishment has two components: the right to take up an activity, and the right to pursue it. The concept of establishment implies the permanent or semi-permanent settlement of a natural or legal person for the purpose of pursuing an economic activity, ‘through a fixed establishment in another Member State for an indefinite period’ (Case C-221/ 89 R v Secretary of State for Transport, ex parte Factortame Ltd and others [1991] ECR I-3905, para 20). The Court described this concept as a very broad one, allowing a [EU] national to participate, on a stable and continuous basis, in the economic life of a Member State other than his State of origin and to profit therefrom, so contributing to economic and social interpenetration within the [EU] in the sphere of activities as self-employed persons. (Case C-55/94 Gebhard v Consiglio dell’Ordine degli Avvocati e Procuratori di Milano [1995] ECR I-4165, para 25) In order to determine whether an activity in a Member State can be regarded as permanent, stable and continuous, the Court has offered in Case C-202/97 Fitzwilliam Executive Search Ltd v Bestuur van het Landelijk instituut sociale verzekeringen [2000] ECR I-883 (para 43) a non-exhaustive list of criteria to be considered in each specific case, such as: • the place where the undertaking has its seat and administration; • the number of administrative staff working in the Member State in which the undertaking is established and in the other Member State; • the place where posted workers are recruited, and the place where the majority of contracts with clients are concluded; • the law applicable to the employment contracts concluded by the undertaking with its workers, on the one hand, and with its clients, on the other hand; and • the turnover during an appropriately typical period in each Member State concerned.

15.3.2 The concept of services Related to the right of establishment is the right of an individual, partnership or company based in one Member State to provide services temporarily in another

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Member State, rather than establishing a permanent business in the latter State. Under Article 56, first paragraph TFEU: Restrictions on freedom to provide services within the Union shall be prohibited in respect of nationals of Member States who are established in a Member State other than that of the person for whom the services are intended. This provision applies to services ‘in so far as they are not governed by the provisions relating to freedom of movement for goods, capital and persons’ (Article 57, first paragraph). Drawing a distinction between freedom of establishment and the freedom to provide services, Article 57, third paragraph TFEU also provides: Without prejudice to the provisions of the Chapter relating to the right of establishment, the person providing a service may, in order to do so, temporarily pursue his activity in the Member State where the service is provided, under the same conditions as are imposed by that State on its own nationals.

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ca ple In Gebhard, a German lawyer residing in Italy initially practised as an associate in Italian m exa chambers of lawyers in Milan before opening his own chambers, in which he worked in collaboration with Italian lawyers. Following complaints lodged with the Milan Italian Bar, the latter initiated disciplinary proceedings against Gebhard on the ground that he had contravened Italian law by pursuing a professional activity in Italy on a permanent basis in chambers set up by himself whilst using the title of ‘avvocato’. He was suspended from pursuing his professional activity for six months. Gebhard challenged that decision on the ground that Directive 77/249/EEC (to facilitate the effective exercise by lawyers of freedom to provide services, [1977] OJ L78/17) gave him the right to pursue his professional activities from his own chambers in Milan. As the Court explained, whether Article 52 TEC (now Article 49 TFEU) or Article 59 TEC (now Article 56 TFEU) is to apply to any particular situation is to be determined by the temporary nature of the provision of the services. Referring to its Advocate General’s opinion, the Court confirmed that ‘the temporary nature of the activities in question has to be determined in the light, not only of the duration of the provision of the service, but also of its regularity, periodicity or continuity’ (para 27). That being said, as the Court further stated in the same paragraph, [t]he fact that the provision of services is temporary does not mean that the provider of services … may not equip himself with some form of infrastructure in the host Member State (including an office, chambers or consulting rooms) in so far as such infrastructure is necessary for the purposes of performing the services in question.

This was indeed the case, for instance, as regards a leasing company that supplied cars to customers established in another Member State, and which was contacted through self-employed intermediaries also established in that State (see Case C-190/95 ARO Lease BV v Inspecteur van de Belastingdienst Grote Ondernemingen te Amsterdam [1997] ECR I-4383). Furthermore, only services ‘normally provided for remuneration’ are to be considered to be ‘services’ within the meaning of the Treaty. Not expressly defined, the term ‘remuneration’ has been interpreted broadly by the Court. It does not necessarily mean that the service must be paid for by those for whom it is performed, as in Joined Cases C-51/96 and C-191/97 Deliège v Ligue Francophone de Judo [2000] ECR I-2549, para 56 (high-ranking athlete’s participation in an international competition involving the provision of a number of separate, related services, such as the organisation of sports events which are attended by the public, are broadcast on television, and attract

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advertisers and sponsors), or in Case 352/85 Bond van Adverteerders and others v The Netherlands [1988] ECR 2085, para 16 (distribution by operators of cable networks established in a Member State of television programmes supplied by broadcasters established in other Member States, a service for which the cable network operators were paid in the form of fees, which they charged their subscribers rather than the broadcasters). The ‘essential characteristic’ of remuneration ‘lies … in the fact that it constitutes consideration for the service in question, and is normally agreed upon between the provider and the recipient of the service’ (Case 263/86 Belgium v Humbel and Edel [1988] ECR 5365, para 17). Such a characteristic is, for instance, missing in courses that form part of a secondary education provided under a national education system funded from the public purse (Humbel, para 18). In contrast, if the distribution by Irish student associations of information about the identity and location of abortion clinics involved in the lawful termination of pregnancies in another Member State cannot be regarded as a service, since the clinics had no involvement in the distribution of the information (Case C-159/90 Society for the Protection of Unborn Children Ireland Ltd v Grogan and others [1991] ECR I-4685, paras 24–27), the lawful termination of pregnancy is ‘a medical activity which is normally provided for remuneration and may be carried out as part of a professional activity’, and as such, is a service within the meaning of Article 57 TFEU (paras 18–21). Equally, medical treatment provided in one Member State and paid for by the patient is a service, even if the patient can apply for reimbursement of the costs of that treatment under another Member State’s sickness insurance legislation (Case C-157/99 BSM Geraets-Smits v Stichting Ziekenfonds VGZ [2001] ECR I-5473, para 55). Under Article 57, second paragraph, a service notably includes activities of an industrial or commercial character, and activities of craftsmen or of the professions, but also, more generally, any genuine and effective economic activities. These include sporting activities, such as in international competitions (Deliège v Ligue Francophone de Judo; by contrast, Case C-90/16 The English Bridge Union Ltd v Commissioners for Her Majesty’s Revenue & Customs ECLI:EU:C:2017:814: duplicate bridge is not a sporting activity), the transmission of television signals (Case 155/73 Sacchi [1974] ECR 409), the broadcasting of advertisements (Case 352/85 Bond van Adverteerders and Others v Netherlands State [1988] ECR 2085), the grant of credit on a commercial basis (Case C-452/04 Fidium Finanz AG v Bundesanstalt für Finanzdienstleistungsaufsicht [2006] ECR I-9521), lottery activities (Case C-275/92 Schindler [1994] ECR I-1039), betting on sporting events (Case C-67/98 Questore di Verona v Zenatti [1999] ECR I-7289; Case C-409/06 Winner Wetten GmbH v Bürgermeisterin der Stadt Bergheim [2010] ECR I-8015), online gambling (Joined Cases C-447/08 and C-448/08 Criminal proceedings against Sjöberg and Gerdin [2010] ECR I-6921), games of chance and online games of chance (Case C-49/16 Unibet International Ltd v Nemzeti Adó- és Vámhivatal Központi Hivatala EU:C:2017:491), intermediation services (Case C-434/15 Asociación Profesional Elite Taxi v Uber Systems Spain, SL EU:C:2017:981: intermediation service consisting of connecting non-professional drivers using their own vehicle with a person who wishes to make an urban journey), etc. Moreover, the freedom to provide services covers both the providers and the recipients of services (Joined Cases 286/82 and 26/83 Luisi and Carbone v Ministero del Tesoro [1984] ECR 377, para 16; and Case C-42/07 Liga Portuguesa de Futebol

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Profissional and Bwin International Ltd v Departamento de Jogos da Santa Casa da Misericórdia de Lisboa [2009] ECR I-7633, para 51). The service concerned will not be covered by Articles 56 and 57 TFEU unless it has a cross-border element. This can occur in four different situations: (a) the service provider travels to another Member State; (b) the service recipient travels to another Member State; (c) both service provider and recipient, based in the same State, travel to the host State where the service is provided; or (d) the service itself is provided across the border by post, telecommunication or electronic communication (television broadcast, phone communication, fax transmission, online service).

15.3.3 The beneficiaries of the freedom of establishment and the freedom to provide services Both physical and legal persons are granted the rights of establishment and to provide services. 15.3.3.1

Natural persons Nationals of the EU are the primary beneficiaries of Articles 49 and 56 TFEU, which give them the right to take up and exercise an activity as self-employed persons or set up and manage a company in another Member State, and the right to provide services in another Member State. They must, however, reside in an EU Member State in order either to set up agencies, branches or subsidiaries (secondary establishment), or to provide services in another Member State.

Freedom of establishment (Art 49 TFEU) Rights to take up and pursue activities in another Member State as self-employed persons, and to set up and manage undertakings, companies or firms Through a fixed establishment in another Member State for an indefinite period (C-221/89 Factortame)

Freedom to provide services (Arts 56 and 57 TFEU) Right to pursue activities in another Member State on a temporary basis (C-55/94 Gebhard) Activities or an industrial or commercial character and activities of craftsmen or of the professions C-51/96 Deliège v Ligue Francophone de Judo) Services are normally provided for remuneration (C-159/90 SPUC v Grogan)

On a stable and continuous basis (C-55/94 Gebhard)

Services must have a cross-border element (C-159/90 SPUC v Grogan) Freedom to provide services covers providers and recipients of services (286/82 and 26/83 Luisi and Carbone and C-42/07 Liga Portuguesa de Futebol Profissional)

Figure 15.2 Freedom of establishment and freedom to provide services

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Those rights extend to the family members of EU nationals, whether they are EU nationals or not (Article 23 of Directive 2004/38/EC; see Case 131/85 Gül v Regierungspräsident Düsseldorf [1986] ECR 1573). Third-country nationals who are not family members of an EU national can rely on those provisions on the basis of: (a) the Agreement on the European Economic Area (EEA) ([1994] OJ L1/3) or the EU–Swiss Agreement on the free movement of persons ([2002] OJ L114/6), which give EEA and Swiss citizens rights of establishment and to supply services; or (b) association or cooperation agreements between the EU and third countries (eg, Turkey, Morocco, Algeria); or (c) Council Directive 2003/109/EC concerning the status of third-country nationals who are long-term residents ([2004] OJ L16/44). Although Article 56, second paragraph TFEU provides that the freedom to provide services may be extended to third-country nationals who are established within the EU and provide services, no EU secondary legislation has been adopted yet. 15.3.3.2

Legal persons Articles 54 and 62 TFEU also extend the right of establishment and the right to provide services to companies or firms that have their registered office, central administration or principal place of business within the EU. ‘Companies or firms’ means companies or firms ‘constituted under civil or commercial law’ of a Member State, and include ‘cooperative societies, and other legal persons governed by public or private law, save for those which are non-profit-making’ (Article 54, second paragraph TFEU). In order to benefit from those freedoms, companies must be incorporated under the legislation of a Member State and have their registered office, real head office, central management and control or principal place of business within the EU (right to primary establishment). However, since companies are, in the absence of EU harmonisation, ‘creatures of national law’, and ‘exist only by virtue of the varying national legislation which determines their incorporation and functioning’ (Case 81/87 R v HM Treasury and Commissioners of Inland Revenue, ex parte Daily Mail and General Trust plc [1988] ECR 5483, para 19), they cannot rely on Articles 49 and 54 TFEU to ‘transfer their central management and control and their central administration to another Member State while retaining their status as companies incorporated under the legislation of the first Member State’ (para 24) if the company law of that first State does not allow it. This ruling was later confirmed in Case C-210/06 Cartesio Oktató és Szolgáltató bt [2008] ECR I-9641, in which a company incorporated under Hungarian law was prohibited under that law from transferring its seat to Italy while continuing to be subject to Hungarian law. Hungarian law did not breach the company’s right of establishment. Having a principal place of business in a Member State, companies can then set up agencies, branches and subsidiaries in another Member State (secondary establishment). In Case C-446/03 Marks & Spencer plc v David Halsey (Her Majesty’s Inspector of Taxes) EU:C:2005:763, the Court reaffirmed that Freedom of establishment, which Article [49 TFEU] grants to [EU] nationals and which includes 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 Member State where such establishment is effected, entails, in accordance with Article [54 TFEU], for companies or firms

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formed in accordance with the law of a Member State and having their registered office, central administration or principal place of business within the European Community, the right to exercise their activity in the Member State concerned through a subsidiary, a branch or an agency … (para 30) As in this case, the right to secondary establishment also means that, under certain circumstances, notably definitive losses (see M&S, para 55 and Case C-172/13 European Commission v United Kingdom of Great Britain and Northern Ireland EU:C:2015:50, para 36), a parent company established in one Member State may claim deduction from its taxable profits losses incurred in another Member State by a subsidiary established in that Member State. A national law preventing a resident parent company from claiming such tax relief while allowing it for losses incurred by a resident subsidiary can be regarded as impeding freedom of establishment unless it ‘pursues legitimate objectives which are compatible with the Treaty and constitute overriding reasons in the public interest and that they are apt to ensure the attainment of those objectives’ (see M&S, para 51). The M&S jurisprudence was confirmed in more recent cases such as Case C-650/18 A/S Bevola and Jens W Trock ApS v Skatteministeriet EU:C:2018:424, para 66, Case C-607/17 Skatteverket v Memira Holding AB EU:C:2019:510 and Case C-608/17 Skatteverket v Holmen AB EU:C:2019:9. The right to secondary establishment cannot be restricted by a Member State on the ground that the branch or subsidiary carries out its entire business where it has been created.

se

ca ple In Case C-212/97 Centros Ltd v Erhvervs- og Selskabsstyrelsen [1999] ECR I-1459, Mrs m exa Bryde, a Danish national, set up Centros Ltd in the UK, and then sought to set up its subsidiary in Denmark. The Danish authorities refused to register the branch on the ground that Centros did not trade in the UK and Mrs Bryde was in fact seeking to establish in Denmark a principal establishment by circumventing the Danish rules, notably those regarding the paying up of a higher minimum capital share. Rejecting the argument of the Danish Government, which was that this situation was purely internal to Denmark, the Court ruled not only that it fell within the scope of former Article 52 TEC (now Article 49 TFEU), but also that ‘it is immaterial that the company was formed in the first Member State only for the purpose of establishing itself in the second, where its main, or indeed entire, business is to be conducted’ (para 17). While a Member State is entitled to prevent some of its nationals from taking advantage of EU law provisions in an attempt to circumvent improperly their national legislation, it cannot prevent them from forming a company under the rules of company law of a Member State which seem the least restrictive, and then setting up branches in other Member States. Such behaviour ‘cannot, in itself, constitute an abuse of the right of establishment’, since ‘[t]he right to form a company in accordance with the law of a Member State and to set up branches in other Member States is inherent in the exercise, in a single market, of the freedom of establishment guaranteed by the Treaty’ (para 27). See also Case C-167/01 Kamer van Koophandel en Fabrieken voor Amsterdam v Inspire Art Ltd EU:C:2003:512. Inspire Art was registered in Folkstone as a private company limited by shares under the law of England and Wales, thus avoiding the requirement under Dutch law of minimum capital and directors’ liability. It carried on activities in the sphere of dealing in objets d'art under the business name Inspire Art Ltd through its branch in Amsterdam, which was registered in the commercial register of the Chamber of Commerce without any indication of the fact that it was a formally foreign company under Article 1 of the WFBV (Law on formally foreign companies). The WFBV was deemed to restrict the exercise of freedom of secondary establishment in the Netherlands by a company formed under the law of another Member State, save where abuse is established on a case-by-case basis (para 105).

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Company transformation operations, such as cross-border mergers (Case C-411/03 SEVIC Systems AG [2005] ECR I-10805: refusal of registration in the national commercial register of the merger of a company by dissolution without liquidation and transfer of its assets to another company) and cross-border conversions (Case C-378/ 10 VALE Építési kft EU:C:2012:440: cross-border transfer of a company by removal from the commercial register under the law of one Member State and its reincorporation as a company under the law of another Member State; and Case C106/16 Polbud – Wykonawstwo sp. z o.o. EU:C:2017:804: a national law may not impose mandatory liquidation on companies that wish to transfer their registered office to another Member State when there is no change in the location of its real head office), also constitute particular methods of exercise of the freedom of establishment, important for the proper functioning of the internal market, and are therefore amongst those economic activities in respect of which Member States are required to comply with the freedom of establishment laid down by Article [49 TFEU]. (SEVIC, para 19)

15.3.4 The Services Directive In its Report on The State of the Internal Market for Services (COM(2002) 441 final), the Commission concluded that 10 years after the completion of the internal market, ‘there [was still] a huge gap between the vision of an integrated EU economy and the reality as experienced by European citizens and European service providers’. On 13 January 2004, the Commission published its proposal on services in the internal market (COM(2004) 2 final), later called the Bolkenstein Directive after the Commissioner who initiated it. Its objective was to provide a legal framework that will eliminate the obstacles to the freedom of establishment for service providers and the free movement of services between the Member States, giving both the providers and recipients of services the legal certainty they need in order to exercise these two fundamental freedoms enshrined in the Treaty. (at 3) It was intended to cover a wide range of economic service activities and to apply only to service providers established in a Member State. The proposed Directive was based on the quintessential principle of the ‘country of origin’, whereby ‘a service provider is subject only to the law of the country in which he is established and Member States may not restrict services from a provider established in another Member State’ (at 3). Although this principle was simply another form of the principle of mutual recognition (eg, as applied to the free movement of goods – see 13.2.3.2), allowing service providers to export their business and commercial models, it was rapidly perceived as carrying the risk of social dumping and lowering standards of services. Owing to a lack of consensus about it and the controversy and hostility that it generated, the ‘country of origin’ rule was simply abandoned in the text adopted by the European Parliament in the first reading. The scope of application of the proposed Directive was also narrowed down. Despite those setbacks, Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on services in the internal market ([2006] OJ L376/ 36) constitutes an important step towards further liberalisation of services.

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Scope of application of the Directive Directive 2006/123/EC (‘the Services Directive’) is a horizontal framework directive, the purpose of which is to establish ‘general provisions facilitating the exercise of the freedom of establishment for service providers and the free movement of services, while maintaining a high quality of services’ (Article 1(1)). However, Article 2(2) excludes a number of services from its scope of application by reason of their nature, such as: • non-economic services of general interest • services of temporary work agencies • healthcare services • social services relating to social housing, childcare, and support of families and persons in need • gambling activities • activities connected with the exercise of official authority as set out in Article 51 TFEU (see 15.6.2). Other services already covered by other directives are also excluded. This is the case as regards: • financial services (eg, banking, credit, insurance, etc) listed in Annex I to Directive 2006/48/EC on the taking up and pursuit of the business of credit institutions ([2008] OJ L177/1) • electronic communications services and networks covered by four 2002 Directives (see Case C-360/15 College van Burgemeester en Wethouders van de gemeente Amersfoort v X BV and Visser Vastgoed Beleggingen BV v Raad van de gemeente Appingedam EU:C:2018:44) • services in the field of transport, including port services • audiovisual services. Further ‘[a]dditional derogations from the freedom to provide services’ are also provided for under Article 17 of the Services Directive. This provision excludes the application of the Directive to services of general economic interest, and to sectors and activities already covered by EU legislation, such as services in the postal, electricity and gas sectors, water distribution and supply services, and waste water services and treatment of waste. Amongst others, matters covered by Directive 96/71/EC on the Posting of Workers ([1997] OJ L18/1), Directive 95/46/EC on the protection of personal data and on the free movement of such data ([1995] OJ L281/314), and Council Directive 77/249/EEC on lawyers’ freedom to provide services ([1977] OJ L78/ 17), as well as a variety of disparate areas (eg, judicial recovery of debts, acts requiring by law the involvement of a notary, registration of vehicles leased in another Member State, etc) are also excluded. Within its scope of application, the Services Directive reinforces the principles of freedom of establishment (Chapter III) and of free provision of services (Chapter IV).

15.3.4.2

Freedom of establishment for providers The Services Directive simply consolidates the case law of the Court on the conditions for the lawfulness of national schemes of authorisation and of national requirements for access to, and exercise of, a service activity. Under Article 9, access to a service activity and its exercise cannot be subject to an authorisation scheme unless:

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(a) it does not discriminate against the service provider; (b) it is justified by an overriding reason relating to the public interest; and (c) the objective pursued cannot be attained by means of a less restrictive measure (see 15.4.4). Furthermore, an authorisation scheme must fulfil clear criteria listed under Article 10 and be: (a) non-discriminatory; (b) justified by an overriding reason relating to the public interest; (c) proportionate to that public interest objective; (d) clear and unambiguous; (e) objective; (f) made public in advance; and (g) transparent and accessible. With regard to national requirements imposed on service activities, the Services Directive distinguishes between ‘prohibited requirements’ and those ‘subject to evaluation’. Article 14 prohibits notably all discriminatory requirements based directly or indirectly on nationality or the location of the registered office of companies, residence requirements or conditions of reciprocity with the Member State in which the service provider is already established, etc. Furthermore, Article 15 provides that Member States must assess whether, under their legal systems, certain requirements (such as, amongst others, quantitative or territorial restrictions, requirements relating to the shareholding of a company, the obligation to have one establishment only in the territory of the same State or to have a minimum number of employees, etc) comply with the principles of non-discrimination, necessity and proportionality (see 15.4.4). As recital 43 of the Directive states: One of the fundamental difficulties faced, in particular by [small and mediumsized enterprises], in accessing service activities and exercising them is the complexity, length and legal uncertainty of administrative procedures. In order to remove such obstacles, the Services Directive lays down the principle of administrative simplification (Article 5), and requires Member States to set up points of single contact (one-stop shops), where service providers can obtain all relevant information (Article 7) and complete, at the contact point itself or ‘at a distance or by electronic means’ (Article 8), all necessary procedures and formalities relating to their activities (Article 6). 15.3.4.3

Free provision of services Subject to the derogations of Article 17 (see above 15.3.4.1), Article 16 of the Services Directive lays down the ‘freedom to provide services’ clause, which guarantees ‘the right of providers to provide services in a Member State other than that in which they are established’ and under which the host Member State ‘shall ensure free access to and free exercise of a service activity within its territory’. However, Article 16(1), third paragraph allows Member State to restrict the activities of service providers by imposing proportionate, non-discriminatory national requirements, ‘justified for reasons of public policy, public security, public health or the protection of the environment’. It is to be noted, though, that, in contrast with restrictions on the freedom of establishment, restrictions on the freedom to provide services cannot be justified by ‘overriding reasons relating to the public interest’, as recognised and

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developed in the settled case law of the Court of Justice (see 15.4.4) and defined in point 8 of Article 4 of the Directive. Furthermore, Article 18 allows Member States to take, in exceptional circumstances, measures relating to the safety of services against a provider established in another Member State. The Services Directive also enhances the rights of consumers and businesses that are service recipients. Beside requiring the removal of all restrictions on the use of services supplied by providers from another Member State, and prohibiting all discrimination based on nationality or place of residence (Article 20), the Directive aims to guarantee full protection of service recipients through detailed information on providers and services (Article 22), and by the requirement for professional liability insurance or equivalent guarantees imposed on service providers presenting a direct risk to the health and safety of recipients (Article 23). The Services Directive also requires Member States to ensure that recipients can obtain, in their country of residence, information relating to consumer protection, on means of redress in the case of any dispute between a service provider and the recipient, and contact details of consumer organisations and centres of the European Consumer Centres Network in order to get practical assistance (Article 21). 15.3.4.4

Cooperation between Member States Article 28 of the Services Directive requires Member States to cooperate with each other and provide mutual assistance, with a view to ensuring effective supervision of service providers and of the services provided. Under that provision, the competent authorities of different Member States may exchange information or carry out checks, inspections and investigations upon duly motivated requests. Furthermore, under Article 34, Member States have an obligation to alert other Member States and the Commission to ‘acts or circumstances relating to a service activity that could cause serious damage to the health or safety of persons or to the environment’, either in their own territory or that of other Member States. To facilitate this exchange of information, the Commission, in cooperation with Member States, set up an electronic system for the exchange of information between Member States (Article 34(1)).

15.4 The principle of non-discrimination A cardinal rule of EU law, the principle of non-discrimination is naturally enshrined in the three Treaty provisions that guarantee the free movement of economically active migrants. Article 45(2) TFEU unambiguously provides that freedom of movement shall entail the abolition of any discrimination based on nationality between workers of the Member States … Under Article 49, second paragraph TFEU, a self-employed person has a right of establishment ‘under the conditions laid down for its own nationals by the law of the country where such establishment is effected’. Similarly, a person providing a service in another Member State must be able to do so ‘under the same conditions as are imposed by that State on its own nationals’ (Article 57, third paragraph TFEU). Therefore, the principle of non-discrimination implies that EU migrants are treated in the same way as the nationals of the host country. Equal treatment with nationals is not only further confirmed in secondary legislation applicable to workers and the self-

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employed, but also firmly established as a fundamental legal provision of the EU by the Court of Justice (see Case 2/74 Reyners v Belgium [1974] ECR 631, para 24).

15.4.1 Prohibition of direct and indirect discrimination In order to give full effect to the principle of non-discrimination, the Court held that what are now Article 45 TFEU (Case 36/74 Walrave and Koch v Association Union Cycliste Internationale and others [1974] ECR 1405, para 17; Case C-415/93 Union royale belge des sociétés de football association ASBL v Bosman, Royal club liégeois SA v Bosman and others and Union des associations européennes de football (UEFA) v Bosman [1995] ECR I-4921, para 93), Article 49 TFEU (Case 2/74 Reyners v Belgium [1974] ECR 631, para 32) and Article 56 TFEU (Case 33/74 Van Binsbergen v Bestuur van den Bedrijfsvereniging voor de Metaalnijverheid [1974] ECR 1299, para 27) are capable of direct effect (see 6.3), and may therefore be relied upon in national courts. The direct effect of these provisions reinforces the obligation imposed on Member States to abolish any discrimination based on nationality and any other restrictions on the free movement of workers or self-employed persons. As the Court unequivocally put it in Case 152/73 Sotgiu v Deutsche Bundespost [1974] ECR 153, the principle of non-discrimination ‘forbid[s] not only overt discrimination by reason of nationality but also all covert forms of discrimination which, by the application of other criteria of differentiation, lead in fact to the same result’ (para 11). For instance, restricting appointment and establishment in permanent employment to a State’s own nationals would constitute such overt discrimination, as in Case 307/84 Commission of the European Communities v French Republic [1986] ECR 1725, regarding a nationality requirement for the appointment of nurses in permanent employment in public hospitals. So also would a nationality requirement for access to social housing and reduced-rate mortgage loans (Case 63/86 Commission v Italy [1988] ECR 29). Although more difficult to identify, since they are based on factors other than nationality (such as place of residence, language requirements, etc) and are indistinctly applicable, indirectly discriminatory national measures are also prohibited. In Case C237/94 O’Flynn v Adjudication Officer [1996] ECR I-2617, the Court embraced a broad interpretation of indirect discrimination and ruled that … conditions imposed by national law must be regarded as indirectly discriminatory where, although applicable irrespective of nationality, they affect essentially migrant workers … or the great majority of those affected are migrant workers … where they are indistinctly applicable but can more easily be satisfied by national workers than by migrant workers … or where there is a risk that they may operate to the particular detriment of migrant workers … (para 18) … … [U]nless objectively justified and proportionate to its aim, a provision of national law must be regarded as indirectly discriminatory if it is intrinsically able to affect migrant workers more than national workers and if there is a consequent risk that it will place the former at a particular disadvantage. It is not necessary in this respect to find that the provision in question does in practice affect a substantially higher proportion of migrant workers. It is sufficient that it is liable to have such an effect … (paras 20–21) As a result, the following national measures are regarded as indirectly discriminatory:

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a residence requirement (Sotgiu: separation allowance for a worker employed away from home being lower on the ground that his residence was in another Member State; Case C-111/91 Commission v Luxembourg [1993] ECR I-817: childbirth and maternity allowances made conditional on residence requirements; Case C- 716/17 A EU:C:2019:598: a Danish law making a judicial request to erase debts conditional on a residence requirement) a territorial restriction (Case 305/87 Commission v Greece [1989] ECR 1461: prohibition on foreign, natural or legal persons acquiring ownership of immovable property situated in the border regions of the country) the refusal by a public body in a university open competition to take account of a candidate’s previous employment in the public service in another Member State, when the competition rules did not specify that such experience had to be connected with the duties of the post (Case C-419/92 Scholz v Opera Universitaria di Cagliari and Cinzia Porcedda [1994] ECR I-505) the requirement for authorisation of the use of academic titles awarded in another Member State (Case C-19/92 Kraus v Land Baden-Württemberg [1993] ECR I1663) making the receipt of a study grant by the child of a frontier worker conditional on the frontier worker having worked in the host Member State for a continuous period of five years at the time the application for the grant is made (Case C-238/15 Maria do Céu Bragança Linares Verruga and Others v Ministre de l’Enseignement supérieur et de la Recherche EU:C:2016:949) legal incompatibility between a professional status and a non-professional status (Case C-431/17 Monachos Eirinaios, kata kosmon Antonios Giakoumakis tou Emmanouil v Dikigorikos Syllogos Athinon EU:C:2019:368: Greek legislation prohibiting a monk who has the status of lawyer in another Member State from registering at the Bar on the ground of the incompatibility between the status of monk and the profession of lawyer) obligation to register a motor vehicle in the host Member State that is already registered in another Member State (Case C-420/15 Criminal proceedings against U EU:C:2017:408: Belgian law requiring that a worker residing in Belgium registers in that Member State a motor vehicle which he owns but which is already registered in Italy and is intended essentially for use in Italy) discriminatory calculation of maternity benefit (Case C-651/16 DW v Valsts sociālās apdrošināšanas aģentūra EU:C:2018:162: Latvian law which excluded for the calculation of maternity benefit periods of work in another Member State (in this case in an EU institution) and which led to a substantial reduction of maternity benefit compared to that which would have been granted had the beneficiary worked exclusively in Latvia).

15.4.2 Non-discrimination and access to an economic activity Although the Treaties draw a distinction between employment and self-employment, access to both faces similar restrictions as shown in the case law of the Court. The principle of equal treatment with nationals is a key rule with regard to access to employment. Provided for in Article 45(2) TFEU, it is further enshrined in Regulation 492/2011/EU on freedom of movement for workers within the Union ([2011] OJ L141/ 1), which replaced Regulation 1612/68/EEC ([1968] OJ L257/2). Under Article 1(2) of the Regulation, any EU national has ‘the right to take up available employment in the

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territory of another Member State with the same priority as nationals of that State’. Member States must also abolish all discrimination relating to recruitment procedures (Article 3(2)), to quotas on foreign nationals (Article 4), assistance afforded by employment offices (Article 5), or to medical, vocational or other criteria for recruitment (Article 6). The only exception to this principle is that ‘relating to linguistic knowledge required by reason of the nature of the post to be filled’ (Article 3(1), second subparagraph). However, the Court has interpreted it restrictively, as it does not accept this linguistic requirement where it is not necessary and proportionate to the objective pursued (see Case C-379/87 Groener v Minister for Education and the City of Dublin Vocational Educational Committee [1989] ECR 3967: justified requirement for permanent full-time post of lecturer in public vocational educational institution of linguistic knowledge, imposed as part of a policy for the promotion of the national language). Article 49, second paragraph TFEU also guarantees the right to equal treatment with nationals to anyone wishing to take up an activity as a self-employed person (eg, tradesperson, craftsperson, farmer, regulated profession, etc), or to set up and manage a civil or commercial profit-making company. Thus prohibited are all forms of discrimination such as a single practice requirement, prohibiting migrant doctors, dentists and veterinary surgeons from maintaining a separate practice in another Member State (Case C-351/90 Commission v Luxembourg [1992] ECR I-3945), not granting the same benefits of corporation tax and shareholders’ tax credits to branches in a Member State of companies registered in another State (Case 270/83 Commission v France [1986] ECR 273) or making reciprocity from the State of origin of the EU migrant a condition of access to certain professions (Case 168/85 Commission v Italy [1986] ECR 2945) and incompatibility of the status of monk with the practice of the profession of lawyer (Monachos Eirinaios, 15.4.1 above). Furthermore, Article 23 of Directive 2004/38/EC grants the same rights – to take up employment or self-employment and to equal treatment – to the spouse, partner, children under the age of 21 or dependent children and dependent direct relatives of a migrant worker or self-employed person.

15.4.3 Non-discrimination and pursuit of an economic activity Equal treatment with nationals naturally extends to the pursuit of the activity in employment or self-employment. Article 45(2) TFEU prohibits any discrimination ‘with regard to employment, remuneration and other conditions of work and employment’. Article 7(1) of Regulation 492/2011 further specifies that A worker who is a national of a Member State may not, in the territory of another Member State, be treated differently from national workers by reason of his nationality in respect of any conditions of employment and work, in particular as regards remuneration, dismissal, and, should he become unemployed, reinstatement or re-employment. As the Court put it in Case C-437/17 Gemeinsamer Betriebsrat EurothermenResort Bad Schallerbach GmbH v EurothermenResort Bad Schallerbach GmbH (EU:C:2019:193, para 16), Article 7(1) ‘constitutes merely the specific expression of the principle of non-discrimination laid down in Article 45(2) TFEU within those specific fields’.

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The two provisions must therefore be interpreted in the same way (Case C-514/12 Zentralbetriebsrat der gemeinnützigen Salzburger Landeskliniken, ‘SALK’ EU:C:2013:799, para 23). Under Articles 7(2) to 9, equal treatment also covers: • tax advantages (Article 7(2)) • social advantages (Article 7(2)) (see below 20.4) • access to training in vocational schools and retraining centres (Article 7(3)) • trade-union rights (Article 8) • rights and benefits accorded to national workers in matters of housing, including ownership of housing (Article 9). With regard to the pursuit of an activity in self-employment, the principle of nondiscrimination under Articles 49 and 56 TFEU implies that, in the absence of EU legislation, Member States have discretion to regulate, ‘without discriminating between [their] own nationals and those of the other Member States’, the exercise of such activity (see Case C-61/89 Criminal proceedings against Bouchoucha [1990] ECR I-3551, para 12: restriction of the professional practice of osteopathy exclusively to persons holding the qualification of doctor of medicine), and notably to subject it to professional rules of conduct (see Case 107/83 Ordre des avocats au Barreau de Paris v Klopp [1984] ECR 2971, para 19: access to and exercise of the legal profession; and Case C-106/91 Ramrath v Ministre de la Justice and l’Institut des réviseurs d’entreprises [1992] ECR I-3351, para 37: requirement of a permanent infrastructure for carrying out the work as an auditor within a Member State by a person who was already authorised to practise as an auditor in another Member State, in order to ensure compliance with the rules of professional practice). However, the refusal by a national Bar Association to issue a lawyer a router for RPVA (private virtual network for lawyers) access from the Lyon Bar Association in order to facilitate his practice as a lawyer providing cross-border services on the ground that they are registered at the Bar of another Member State constitutes a restriction of the freedom to provide services (Case C-99/16 Lahorgue v Ordre des avocats du barreau de Lyon and Others EU:C:2017:391).

15.4.4 Prohibition of non-discriminatory restrictions Certain non-discriminatory national measures may still restrict access to, and the pursuit of, an economic activity. In Kraus, the Court stressed that Articles [45] and [49] preclude any national measure governing the conditions under which an academic title obtained in another Member State may be used, where that measure, even though it is applicable without discrimination on grounds of nationality, is liable to hamper or to render less attractive the exercise by [EU] nationals, including those of the Member State which enacted the measure, of fundamental freedoms guaranteed by the Treaty. (para 32) Rules laid down by sporting associations, and preventing a professional footballer, on the expiry of his contract with a club, from being employed by a club of another Member State unless the latter club has paid to the former club a transfer, training or development fee, fall into this category of national rules (Bosman). The same is true, in principle, of legislation of a Member State that reserves the provision of services relating to the monitoring of patents for economic agents possessing certain professional qualifications, thus preventing a company established abroad from

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providing services to holders of patents in that Member State and preventing the latter from freely choosing how their patents should be monitored (Case C-76/90 Säger v Dennemeyer & Co Ltd [1991] ECR I-4221); or of a national measure liable to restrict the right of lawyers to set up chambers on a permanent basis in another Member State (Gebhard); or even a national measure that may prevent or deter a national from one State taking up employment in another Member State, such as the imposition of greater social security contributions than those that would have been paid had he not moved (Case C-18/95 FC Terhoeve v Inspecteur van de Belastingdienst Particulieren/ Ondernemingen buitenland [1999] ECR I-345). However, in an approach similar to that regarding free movement of goods (see Chapter 13), the Court accepts that measures restricting the free exercise of economic activities may be justified on the ground of ‘imperative requirements in the general interest’. This approach has been applied extensively to measures restricting freedom of establishment and freedom to provide services. The Court requires that ‘national measures liable to hinder or make less attractive the exercise of fundamental freedoms guaranteed by the Treaty … fulfil four conditions’ (Säger, para 15; Gebhard, para 38), namely, the measures: (a) must be applied in a non-discriminatory manner; (b) must be justified by imperative requirements in the general interest; (c) must be suitable for securing the attainment of the objective which they pursue; and (d) must not go beyond what is necessary in order to attain it. Naturally, the Court is very cautious not to give any specific definition of those ‘imperative requirements’, and it will simply provide national authorities with some indication of how to assess their national measures against those requirements. As in the case of Cassis de Dijon ‘mandatory requirements’, which may justify trade restrictions (see 14.3.1), ‘imperative requirements’ cannot be relied upon to protect economic interests such as, for instance, ‘maintaining industrial peace in [a] sensitive area of the supply of tourist services’ (see Case C-398/95 Syndesmos ton en Elladi Touristikon kai Taxidiotikon Grafeion v Ypourgos Ergasias [1997] ECR I-3091, para 23: national requirement for a licence constituting a barrier to the freedom of tourist guides from other Member States to provide services in Greece as self-employed guides). Nevertheless, national authorities have some discretion in determining whether a restriction on the exercise of fundamental freedoms may be justified by, amongst other things: • professional rules ‘justified by the general good, such as rules relating to organization, qualifications, professional ethics, supervision and liability’ (see Case C-71/76 Thieffry v Conseil de l’Ordre des Avocats à la Cour de Paris [1977] ECR 765, para 12; and Gebhard, para 35) • the effectiveness of fiscal supervision (see Case C-250/95 Futura Participations SA and Singer v Administration des contributions [1997] ECR I-2471, para 31: measures enabling authorities to ascertain clearly and precisely the amount of income taxable in a State and losses which can be carried forward there)

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Non-discrimination Art 18 TFEU (general provisiion) Art 45(2) TFEU (workers) Art 49, first para TFEU (establishment) Art 57, second para TFEU (services) Discriminatory measures Nature of discrimination Direct discrimination (on ground of nationality) 36/74 Walgrave and Koch 2/74 Reyners 33/74 Van Binsbergen Indirect discrimination residence requirement (152/73 Sotgiu) territorial restriction (305/87 Commission v Greece) requirement of an authorisation for use of academic titles (C-19/92 Krauss)

Object of discrimination Access to an activity C-379/87 Groener C-351/90 Commission v Luxembourg

Non-discriminatory restrictive measures C-19/92 Kraus C-415-93 Bosman C-76/90 Säger C-55/94 Gebhard

Pursuit of an activity C-61/89 Bouchoucha 107/83 Klopp C-106/91 Claus Ramrath

Figure 15.3 The principle of non-discrimination

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•

social protection for victims of road traffic accidents (see Case C-518/06 Commission v Italy [2009] ECR I-3491, paras 81–82: Italian legal obligation to provide coverage for third-party motor vehicle liability insurance, imposed on insurance undertakings, including those based in another Member State and pursuing their business in Italy) the protection of public health (see Case C-531/06 Commission v Italy [2009] ECR I-4103, paras 51–52: Italian law restricting the right to operate a pharmacy to pharmacists alone; and Case C-125/16 Malta Dental Technologists Association and John Salomone Reynaud v Superintendent tas-Saħħa Pubblika and Kunsill talProfessjonijiet Kumplimentari għall-Mediċina EU:C:2017:707, paras 62–63: Maltese law stipulating that the activities of a dental technologist must be pursued in collaboration with a dental practitioner; by contrast see Case C-339/15 Criminal proceedings against Luc Vanderborght EU:C:2017:335: a Belgian law which imposes a general and absolute prohibition of any advertising relating to the provision of oral and dental care services)

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the protection of the consumers (see Case C-390/99 Canal Satélite Digital SL v Adminstración General del Estado and Distribuidora de Televisión Digital SA (DTS) [2002] ECR I-607, para 34: Spanish legislation requiring operators of conditional-access television services to register in a national register) • consumer protection, the prevention of both fraud and incitement to squander on gaming, and the general need to preserve public order (see Joined Cases C-338/04, C-359/04 and C-360/04 Criminal proceedings against Placanica, Palazzese and Sorricchio [2007] ECR I-1891, para 46: Italian law imposing certain conditions on operators of activities in the betting and gaming sector, such as, notably, the obligation to obtain a licence and police authorisation; by contrast, see Unibet: Hungarian legislation on the authorisation of online games of chance which limited, first, in a discriminatory manner, and, second, by reason of its nontransparent nature, the opportunity for operators established in other Member States to organise such games in Hungary) • the protection of patients or clients (see Case C-351/90 Commission v Luxembourg [1992] ECR I-3945, para 13: Luxembourg law prohibiting migrant doctors, dentists and veterinary surgeons from maintaining a separate practice in another Member State). However, even if a non-discriminatory restrictive measure appears to be justified by an imperative requirement in the general interest, it will ultimately be fully justified only if the Court is absolutely satisfied that it meets the last two conditions of suitability and proportionality (see Säger; Gebhard; Case C-202/11 Anton Las v PSA Antwerp NV EU:C:2013:239, para 23: Case C-475/11 Konstantinides EU:C:2013:542, para 50; Venderborght, para 65).

15.5 Mutual recognition of professional qualifications If the Court recognises that Member States may restrict access to, and the exercise of, certain economic activities to ‘holders of a diploma, certificate or other evidence of formal qualifications’ (Gebhard, para 35), EU migrants may face an ‘invisible barrier’, preventing them from taking up such activity. For that reason, Article 53(1) TFEU (and, by reference, Article 62 TFEU) provides: In order to make it easier for persons to take up and pursue activities as selfemployed persons, the Council shall, acting in accordance with the ordinary legislative procedure, issue directives for the mutual recognition of diplomas, certificates and other evidence of formal qualifications … Directives on the mutual recognition of diplomas and professional qualifications adopted under these provisions apply naturally to professional activities pursued by employed and self-employed persons, since the same qualifications are required for their practise as is the case, for instance, of the professional activities of employed and self-employed medical doctors, pharmacists or lawyers.

15.5.1 The original legislative movement The original approach to mutual recognition of diplomas and professional qualifications consisted of the harmonisation of rules in respect of specific professions or economic sectors. Following this approach, ‘sectorial’ directives were adopted in

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three specific sectors: professions in the health sector, the profession of architect, and the legal profession. 15.5.1.1

The health professions Professional qualifications in the health sector were the first to be covered by mutual recognition directives. Each profession was covered by two directives: one on the actual recognition of qualifications, and the other on the minimum harmonisation of training leading to the qualifications. The directives applicable to medical doctors (Directives 75/362/EEC and 75/363/EEC) were the first to be adopted, and served as a template for other professional qualifications and training, such as: • Directives 77/452/EEC and 77/453/EEC on qualifications and the training of nurses responsible for general care • Directives 78/686/EEC and 78/687/EEC on qualifications and the activities of dental practitioners • Directives 78/1026/EEC and 78/1027/EEC on qualifications and the training of veterinary surgeons • Directives 80/154/EEC and 80/155/EEC on qualifications and the activities of midwives • Directives 85/432/EEC and 85/433/EEC on activities and the qualifications of pharmacists.

15.5.1.2

Architects Mutual recognition of qualifications in architecture was originally covered by Directive 85/384/EEC ([1985] OJ L223/15). Unlike the directives listed in 15.5.1.1 above, it did not harmonise the minimum training requirements, but rather established mutual recognition of diplomas and qualifications acquired at the end of a period of education or training of four to six years (Article 4) and ensuring the acquisition of specific skills (Article 3).

15.5.1.3

The legal profession For obvious reasons, the free movement of lawyers proved to be the most complex area to legislate upon. It is therefore not too surprising that the two directives that apply to the legal profession were adopted 21 years apart. Directive 77/249/EEC to facilitate the effective exercise by lawyers of freedom to provide services ([1977] OJ L78/17) applies only to the provision of services by lawyers. It does not deal with the mutual recognition of diplomas, but rather with the professional title used by lawyers in the Member State in which they are established. Under this Directive, a lawyer may represent a client in legal proceedings or before public authorities in another Member State, ‘under the conditions laid down for lawyers established in that State, with the exception of any conditions requiring residence, or registration with a professional organisation, in that State’ (Article 4(1)). However, the lawyer may be required to be introduced to the presiding judge and to the President of the relevant Bar in the host Member State, or to work in conjunction with a lawyer who practises before the judicial authority in that State (Article 5). In any case, the lawyer must observe the rules of professional conduct of the host Member State (Article 4(2)). Long-awaited Directive 98/5/EC to facilitate practice of the profession of lawyer on a permanent basis in a Member State other than that in which the qualification was

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obtained ([1998] OJ L77/36) enables a lawyer who has registered with the competent authority (Article 3), to practise in any other Member State, on a permanent basis and under his home-country professional title (Article 2), activities in the field of the law of his home Member State, on EU law, on international law and on the law of the host Member State (Article 5) (see Monachos Eirinaios, 15.4.1 above: Greek legislation prohibiting a monk who has the status of lawyer in another Member State from registering at the Bar on account of the incompatibility between the status of monk and the profession of lawyer is contrary to EU law). However, the host Member State may exclude certain activities relating to the preparation of ‘deeds for obtaining title to administer estates of deceased persons and for creating or transferring interests in land’ and which are reserved for other professions (such as notaries); it may also require a lawyer representing or defending a client to work in conjunction with a national lawyer. Under Article 6, the migrant lawyer will be subject to the rules of professional conduct in both his home and host Member States. Migrant lawyers wishing to gain admission to the profession of lawyer in the host Member State and to practise under its title, may either take an aptitude test demonstrating their knowledge of the host State law, or simply ‘effectively and regularly [pursue] for a period of at least three years an activity in the host Member State in the law of that State including [EU] law’ (Article 10).

15.5.2 The new approach to harmonisation Progress under the original approach proved to be too slow, and sectorial directives, seen as inadequate to meet the new challenges of the completion of the internal market in the 1990s, gave way to a new general system for the mutual recognition of diplomas. 15.5.2.1

The first wave of legislation This new approach was first introduced by Directive 89/48/EEC on a general system for the recognition of higher-education diplomas awarded on completion of professional education and training of at least three years’ duration ([1989] OJ L19/16). The Directive covered ‘regulated professions’ other than those already covered by a sectorial directive, that is professions whose exercise in a Member State is subject by law to the possession of a diploma, certificate or other evidence of formal qualifications awarded on completion of a course lasting at least three years (eg, chartered accountants, engineers, lawyers, etc). The system of mutual recognition introduced by the 1989 Directive was later extended, by Directive 92/51/EEC on a second general system for the recognition of professional education and training to supplement Directive 89/48/EEC ([1992] OJ L209/25), to those professions for which a lower post-secondary education level of training was required. This new system no longer relies on an automatic mutual recognition of diplomas, as is the case under sectorial directives, but on the presumption that the professional education and professional training obtained in different Member States are comparable. Nationals of the EU cannot be denied, in the host Member State, access to, and the exercise of, a regulated profession subject to the possession of a diploma, on the grounds of inadequate qualifications, if they possess an equivalent diploma required for that profession in another Member State (Article 3). However, they could be required to provide evidence of professional experience should their education or training period be shorter than that required in the host State (Article 4(1)(a)). They

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could also be required to complete an adaptation period not exceeding three years, or take an aptitude test where, notably, the matters covered by their education and training differ substantially from those covered by the diploma required in the host Member State. In such circumstances, an EU national then has the right to choose between an adaptation period and an aptitude test, except ‘for professions whose practice requires precise knowledge of national law and in respect of which the provision of advice and/or assistance concerning national law is an essential and constant aspect of the professional activity’ (Article 4(1)(b)), in which case the host Member State may stipulate either an adaptation period or an aptitude test. For instance, an English solicitor wishing to practise law in France would have to take the French aptitude test. Directive 1999/42/EC ([1999] OJ L201/77) established a third general system for the recognition of qualifications in respect of the professional activities covered by the directives on liberalisation, notably in regard to commerce, industry and craft trades. Although this new approach represented clear progress in the mutual recognition of qualifications, the Commission observed in its 2001 Communication New European Labour Markets, Open to All, with Access for All (COM(2001) 116 Final) that ‘[t]he gaps in the recognition of professional, academic and vocational qualifications from another Member State [still form] a particular obstacle to people working in Europe’ (at 9). Notably, it recognised that [m]eans need to be found to extend the scope for more automatic recognition within the existing systems. At the same time, the rules of the General System and directives on individual professions can be consolidated and a more flexible overall framework provided for EU enlargement. (at 9–10) General rules guaranteeing professional recognition based on a minimum coordination of education and training are also no longer sustainable in their present form. (at 10) Further to these findings, the European Council of Stockholm, on 23 and 24 March 2001, requested the Commission to draft proposals ‘for a uniform, transparent and flexible regime of recognition of qualifications’ (recital 2 of Directive 2005/36/EC). This led to the adoption of Directive 2005/36/EC. 15.5.2.2

Consolidation under Directive 2005/36 The stated objective of Directive 2005/36 on the recognition of professional qualifications ([2005] OJ L255/22) is ‘the rationalisation, simplification and improvement of the rules for the recognition of professional qualifications’ (recital 40). Indeed, it repealed and replaced the sectorial directives and the three directives that set up the general system for recognition. Applying to … all nationals of a Member State wishing to pursue a regulated profession in a Member State, including those belonging to the liberal professions, other than that in which they obtained their professional qualifications, on either a selfemployed or employed basis … (Article 2(1)) the Directive revamps and consolidates the three pre-existing models of mutual recognition. It provides for the following: (a) A general system for the recognition of evidence of training (Articles 10–15), which applies to all professions not covered by the other two systems of recognition under (b) and (c) below. Under this system, professional qualifications are grouped in five levels (Article 11, first paragraph (a)–(e)):

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(i)

an attestation of competence based on a general training course, or based on general primary or secondary education; (ii) a certificate attesting to a successful completion of a secondary course, either general or technical or professional in character; (iii) a diploma certifying successful completion of training at post-secondary level of a duration of at least one year and not exceeding three years; (iv) a diploma certifying successful completion of training at post-secondary level of at least three and not more than four years’ duration, or the equivalent on a part-time basis, at a university or higher education establishment, or at another establishment providing the same level of training; (v) a diploma certifying the completion of a post-secondary course of at least four years’ duration, or the equivalent on a part-time basis, at a university or higher education establishment, or at any other establishment of equivalent level. The principle of mutual recognition applies if the level of qualification of the EU migrant is ‘at least equivalent to the level immediately prior to that which is required in the host Member State’. Mutual recognition operates whether the profession is regulated in the host State and the EU migrant’s home State (Article 13(1)), or in the host State alone. In the latter case, access to the profession will be given to an EU migrant who has pursued that profession ‘on a full-time basis for two years during the previous 10 years in another Member State which does not regulate that profession’, and who possesses attestations of competence or has evidence of formal qualifications (Article 13(2)). However, Article 14 provides for ‘compensatory measures’, in the form of an aptitude test or an adaptation period of up to three years, from which EU migrants may be required to choose, should the training they have received be shorter or substantially different from that required in the host State, or should the regulated profession in the host State comprise regulated professional activities that are not part of the equivalent profession in the EU migrants’ home State (para (1)(a)–(c)). (b) Recognition of professional experience (Articles 16–20), which applies in the same way as it did under Directive 1999/42 (see above 15.5.2.1). (c) Automatic recognition on the basis of coordination of minimum training conditions (Articles 21–52), which applies to all the health professions and the profession of architect previously covered by the sectorial directives (see 15.5.1.1 and 15.5.1.2). The legal profession remains regulated by the 1977 and 1998 Directives, and the 2005 Directive covers the recognition of qualifications for lawyers only for the purpose of immediate practice under the professional title of the host Member State (recital 42). The 2005 Directive gives professionals moving on a temporary and occasional basis more flexibility to practise in any EU Member State. Under its Article 5, they may work or provide services in another Member State on that basis without any prior check of their qualifications – unless their professional activities have public health or safety implications – and without applying for recognition in the host State. However, on their first move from one State to another, they could be required to provide information on their establishment, insurance and professional competence in other Member States.

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Modernisation of Directive 2005/36 Recognition of professional qualifications has become an essential instrument for a more effective exercise of the fundamental freedoms within the internal market. Yet, despite the consolidation of 15 directives into a single instrument by the 2005 Directive, mobility of qualified professionals has remained low in the EU. Furthermore, Member States are facing shortages of skilled workers, which, as the Commission pointed out, ‘are projected to increase in particular in the health sector, in the education sector, and also in growth sectors, such as construction or business services’ (Proposal of 19 December 2011 (COM(2011) 883 final, at 2). Complex recognition procedures, the lack of readily available information on ways of seeking and obtaining recognition of qualifications, and outdated minimum training requirements for the health professions, all contribute to preventing EU migrant professionals from responding rapidly to job opportunities in other Member States. In order to adapt the 2005 Directive to the needs of an evolving EU labour market, the Commission submitted a proposal for its modernisation, rather than its replacement by a completely new directive, which resulted in the adoption of Directive 2013/55/EU amending Directive 2005/36/EC on the recognition of professional qualifications and Regulation (EU) No 1024/2012 on administrative cooperation through the Internal Market Information System ([2013] OJ L354/132). The amending Directive does not radically change the system of recognition of professional qualifications and, whilst confirming the philosophy of mutual recognition based on trust between the Member States, it intends to turn it into a more effective tool through, notably, a greater use of the Internal Market Information System (an electronic tool for improved communication and cooperation between national authorities) and Points of Single Contact (e-government portals, allowing individuals and businesses to obtain online relevant information relating to their activities and to complete electronically all relevant administrative procedures). The key elements of this modernisation process are as follows: • The creation of a European professional card as an option for interested professions, in the form of an electronic certificate exchangeable between Member States’ authorities via the Internal Market Information System, designed to streamline recognition of qualifications and to make it easier for professionals to exercise their activity in another Member State on a permanent or temporary basis. • Improved access to information about recognition of qualifications and completion of recognition procedures through the Points of Single Contact created under the Services Directive (see 15.3.4). • The modernisation of harmonised minimum training requirements for the professions benefiting from automatic recognition (doctors, nurses, midwives, dentists, pharmacists, veterinary surgeons and architects); and the possibility for those professions of continuous professional development to be ensured by Member States. • An alert mechanism, whereby national competent authorities must inform those in other Member States about professionals who have been barred from exercising professional activities that have implications for patient safety or which concern the education of minors, childcare and early childhood education. • The introduction of ‘common training frameworks’ and ‘common training tests’, based on a common set of knowledge, skills and competences necessary to access and practise a profession, in order to facilitate automatic recognition.

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Greater transparency through the provision of national lists of regulated professions and activities reserved for them, and justification for their regulation. • New rules on access to part of the activities reserved to a particular profession. • An extension of the scope of the 2005 Directive to professionals who hold a diploma but have not yet completed the required professional training to achieve full access to the profession. • The non-application of the Directive to notaries appointed by an official act of government. • The reduction from two years to one year of the professional experience requirement, under Article 13(2) of the 2005 Directive, for professionals coming from Member States where the profession is not regulated. • The removal of the former requirement, under Article 13(1)(b) and (2)(b), that the level of qualification of the EU migrant be at least equivalent to the level immediately prior to that which is required in the host Member State. • The introduction of new rules on the checking of language knowledge necessary for the practice of a profession. Legislation modernising and simplifying the system of recognition of professional qualifications is one of the 12 levers to boost growth in the single market and the key action for improving mobility of EU citizens in the single market, as identified by the Commission in the 2011 Single Market Act (see 11.2.3). To have their professional qualifications and experience recognised throughout the EU would enable and should encourage European citizens to seek and take up work in other Member States more quickly, thus helping employers recruit staff with appropriate skills more easily in a labour market affected by slow growth and an ageing population. The creation of a European professional card particularly is seen as a major tool to enhance mobility for highly qualified workers and professionals, and to boost the competitiveness of the European economy.

15.6 Activities falling outside the scope of those freedoms Traditionally, public international law recognises the right of States to reserve certain activities connected to the exercise of State authority or sovereign rights for their nationals only, thus emphasising the special relationship between a State and its own citizens. In this respect, the EC and the EU Treaties have always embraced this approach, in so far as they exclude from the scope of application of the provisions on the free movement of workers and of self-employed persons specific activities in the public service or involving the exercise of official authority under Articles 45(4) and 51 and 62 TFEU respectively. However, the Court of Justice has always interpreted those public service and official authority exceptions restrictively, thus promoting the idea that the EU national has a special status compared to that of non-EU nationals.

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Consolidation Directive 2005/36/EC and Modernisation Directive 2013/55/EU (excluding the legal professions) General system of mutual recognition Directive 89/48/EEC Directive 92/51/EEC Directive 1999/42/EC Sectorial approach health professions (medical doctors, nurses, pharmacists, dentists and veterinary surgeons) architects lawyers Mutual recognition of diplomas and qualifications

Figure 15.4 Mutual recognition of diplomas and qualifications

15.6.1 Public service Article 45(4) TFEU unambiguously provides that The provisions of [Article 45] shall not apply to employment in the public service. However, it cannot be interpreted as giving Member States full discretion as to how to interpret the term ‘employment in the public service’, and therefore as giving them the right to exclude from the application of Article 45 TFEU all activities in services performed by public authorities or entities. Like the concept of ‘worker’ (see 15.2.1.1), that of ‘employment in the public service’ was given an autonomous European meaning. In Lawrie-Blum (see 15.2.1.1), the Court ruled that ‘employment in the public service’ did not cover the period of preparatory service for the teaching profession, the reason being that the activities of a teacher or a trainee teacher do not involve the exercise of powers conferred by public law.

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se

ca ple In Case 149/79 Commission v Belgium [1980] ECR 3881, the Commission brought an m exa enforcement action against Belgium for making the possession of Belgian nationality – or allowing it to be made – a condition of recruitment to posts not covered by the public service exception. The posts in question were advertised by the Belgian national and local railways, the City of Brussels and the Commune of Auderghem, and covered a wide range of jobs, from head technical office supervisor, principal supervisor, works supervisor, stock controller and night watchman to electricians, garden hands, joiners, children’s nurses, signalmen, drivers, office cleaners, etc. Adopting a functional rather than an institutional or organisational interpretation of the notion of ‘public service’, the Court held that [s]uch a classification depends on whether or not the posts in question are typical of the specific activities of the public service in so far as the exercise of powers conferred by public law and responsibility for safeguarding the general interests of the State are vested in it. (para 12, emphasis added) The two criteria (the exercise of powers conferred by public law and safeguarding general interests) are not to be regarded as alternative but cumulative, and must be assessed on a case-by-case basis in light of the nature of the tasks and responsibilities involved.

Only those activities fitting this functional definition can be covered by the public service exception, on the ground that they ‘require a special relationship of allegiance to the State on the part of persons occupying them and reciprocity of rights and duties which form the foundation of the bond of nationality’ (Lawrie-Blum, para 27). The direct result of this restrictive interpretation of the public service exception was to make accessible to all EU nationals jobs in the public service traditionally reserved by a Member State for its own nationals. These include notably posts in the education sector (Lawrie-Blum: trainee teachers; Case 33/88 Allué and Coonan v Università degli studi di Venezia [1989] ECR 1591: university foreign-language assistants); posts in the railways and employment for municipal authorities (Case 149/79 Commission v Belgium [1982] ECR 1845: drivers, loaders, electricians, gardeners); posts in the health service (Case 307/84 Commission v France [1986] ECR 1725: nurses); posts in the utility sector (Case C-173/94 Commission v Belgium [1996] ECR I-3265: officials or public employees of the public bodies responsible for the distribution of water, gas and electricity); and posts in non-military research (Case 225/85 Commission v Italy [1987] ECR 2625: researchers employed by a national research council), etc. In 1988 the Commission addressed to the Member States a Communication on Freedom of workers and access to employment in the public service of member states – Commission action in respect of the application of Article 48(4) of the EEC Treaty ([1988] OJ C72/2), to monitor the application of the Court’s case law regarding access to employment in four sectors: commercial services administered by public bodies; public healthcare services; the teaching sector; and non-military research. In this Communication, the Commission considered that the public service exception covers ‘specific functions of the State and similar bodies such as the armed forces, the police and other forces of the maintenance of order, the judiciary, the tax authorities and the diplomatic corps’, but not those functions in these fields that do not involve the exercise of public authority, such as administrative, technical or maintenance tasks. The latter functions or posts may not be restricted by a Member State to its own nationals (Commission Communication on Free movement of workers – Achieving the full benefits and potential (COM(2002) 694 Final) at 19).

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Combined with some enforcement procedures (see Cases C-473/93 Commission v Luxembourg [1996] ECR I-3207; C-173/94 Commission v Belgium [1996] ECR I-3265; and C-290/94 Commission v Greece [1996] ECR I-3285), the 1988 Commission action encouraged Member States to adopt reforms to open up their public sectors to EU nationals (eg, The Netherlands in 1988, and France in 1991 and 2005). However, in its Staff Working Document, Free movement of workers in the public sector (SEC(2010) 1609 final), the Commission deplored that, [i]n many Member States, the functional criteria established by the case law have been transformed into organisational criteria: what is contained in the national provisions or application rules are lists of posts according to sectors, departments, categories, etc, and no further distinction is made in relation to the different posts. (at 15) As a result, many Member States are still reserving for their own nationals all posts in specific government departments, posts at a high and middle management level in administrative authorities, or all posts in the civil service.

15.6.2 Exercise of official authority The freedom of establishment and the freedom to provide services are also subject to a similar exception. With regard to services, Article 62 TFEU simply refers to Article 51, first paragraph TFEU, which, limiting the right to establishment, provides: The provisions [on the right of establishment] shall not apply, so far as any given Member State is concerned, to activities which in that State are connected, even occasionally, with the exercise of official authority. Like the public service exception, the official authority exception has been interpreted narrowly by the Court. However, unlike the former, the latter does not concern so much access to a profession as the right to exercise certain activities within that profession.

se

ca ple In Case 2/74 Reyners v Belgium [1974] ECR 631, a Dutch national, who held a Belgian m exa legal diploma giving him the right to take up the profession of ‘avocat’ in Belgium, was excluded from that profession by reason of his nationality as a result of a 1972 Royal Decree on the title and exercise of this profession. The Belgian lawyers’ professional body and the Luxembourg Government argued that the Treaty provisions on the right of establishment could not apply to the whole profession of ‘avocat’, because it was ‘connected organically with the functioning of the public service of the administration of justice’ (para 35) and, notably, because the activities of ‘avocats’ made them ‘indispensable [auxiliaries] of the administration of justice, [and] form a coherent whole, the parts of which [could not] be separated’ (para 37). The Court ruled that [the] exception to freedom of establishment provided for by the first paragraph of Article [51] must be restricted to those of the activities referred to in Article [49] which in themselves involve a direct and specific connexion with the exercise of official authority. (para 55, emphasis added) A lawyer’s activities of consultation, legal assistance, or representation and defence of parties in court do not fit this description and cannot therefore be covered by this exception.

Equally, the activities of Court experts who are professional translators (Joined Cases C-372/09 and C-373/09 Peñarroja Fa [2011] ECR I-1785), or even those of civil law

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notaries (Cases C-47/08 Commission v Belgium [2011] ECR I-4105; Case C-50/08 Commission v France [2011] ECR I-4195; and C-53/08 Commission v Austria [2011] ECR I-4309) do not constitute activities connected with the exercise of official authority. Public service exception (Art 45(4) TFEU) Functional definition 149/79 Commission v Belgium Public service activities must involve the exercise of powers conferred by public law and responsibility for safeguarding the general interests of the State Commission Communication on Freedom of Workers and Access to Employment in the Public Service of Member States ([1988] OJ C72/2)

Official authority exception (Arts 51 and 62 TFEU) Restricted activities must in themselves involve a direct and specific connection with the exercise of official authority 2/74 Reyners; C-47/08 Commission v Belgium Restrictions may only be applied to those activities exercised in the profession, but not to the whole profession 2/74 Reyners

Figure 15.5 Public service and official authority exceptions

15.7 Further reading Barnard C, ‘Unravelling the Services Directive’ (2008) 45 CML Rev 323. Castro Olivera A, ‘Workers and other Persons: Step-by-Step from Movement to Citizenship’ (2002) 39 CML Rev 77. Daniele L, ‘Non-Discriminatory Restrictions to the Free Movement of Persons’, (1997) 22 EL Rev 191. Davies G, ‘Brexit and the Free Movement of Workers: A Plea for National Legal Assertiveness’ (2016) 41(6) EL Rev 925. De La Rosa S, ‘The Directive on Cross-Border Healthcare or the Art of Codifying Complex Case Law’ (2012) 49 CML Rev 15. Demmke C and Linke U, ‘Who’s a National and Who’s a European? Exercising Public Power and the Legitimacy of Art 39.4 EC in the 21st Century’ (2003) 2 Eipascope 1. Ellis E, ‘Social Advantages: a New Lease of Life?’ (2003) 40 CML Rev 639. Golynker O, ‘Jobseekers’ Rights in the European Union’ (2005) 30 EL Rev 111. Handoll J, ‘Article 48(4) EEC and Non-National Access to Public Employment’ (1988) 13 EL Rev 223. Lombay J, ‘Assessing the European Market for Legal Services: Developments in the Free Movement of Lawyers in the European Union’ (2010) 33 Fordham International Law Journal 1629. Mancini GF, ‘The Free Movement of Workers in the Case-Law of the European Court of Justice’ in Curtin D and O’Keeffe D (eds), Constitutional Adjudication in European Community and National Law (Butterworths, 1992) 67. Martín Fernández J-M, ‘Re-defining Obstacles to the Free Movement of Workers’ (1996) 21 EL Rev 313.

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Mörsdorf O, ‘The Legal Mobility of Companies within the European Union through Cross-Border Conversion’ 49 (2012) CML Rev 629. O’Brien C, ‘Real Link, Abstract Rights and False Alarms: The Relationship between the ECJ’s “Real Link” Case Law and National Solidarity’ (2008) 33 EL Rev 643. O’Brien C, ‘Social Blind Spot and Monocular Policy Making: The ECJ’s Migrant Worker Model’ (2009) 46 CML Rev 1107. O’Keeffe D, ‘Practical Difficulties in the Application of Article 48 of the EEC Treaty’ (1982) 19 CML Rev 35. O’Keeffe D, ‘Equal Rights for Migrants: the Concept of Social Advantages in Article 7(2), Regulation 1612/68’ (1985) 5 Yearbook of European Law 92. O’Keeffe D, ‘Judicial Interpretation of the Public Service Exception in Article 48, Paragraph 4 of the EEC Treaty’ in Curtin D and O’Keeffe D (eds), Constitutional Adjudication in European Community and National Law (Butterworths, 1992) 89. Pravita M-I, ‘The Access of EU Citizens to the Public Service: A Comparative Analysis’ (2010) 2(2) Review of European Studies 18. Rentrop T, ‘The Mutual Recognition of Diplomas. A Quest for a more Effective/Efficient Operation of the System While “Living in the Shadows”’ (2002) 1 Eipascope 18. Roth W-H, ‘From Centros to Überseering: Free Movement of Companies, Private International Law and Community Law’ (2003) 52 ICLQ 177. Tryfonidou A, ‘In Search of the Aims of the EC Free Movement of Persons Provisions: Has the Court of Justice Missed the Point?’ (2009) 46 CML Rev 1591. Vossenstein G, ‘Cross-Border Transfer of Seat and Conversion of Companies under the EC Treaty Provisions on Freedom of Establishment’ (2009) 6 European Company Law 115. White C, ‘Revisiting Free Movement of Workers’ (2010) 33 Fordham International Law Journal 1564. Summary

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Since the original Treaty of Rome, EU migrants have had the right to move to, and reside in, another Member State with the view to taking up and pursuing an economic activity. They may enjoy this freedom to exercise an economic activity either as workers under Article 45 TFEU, or as self-employed persons, by setting up a business under Article 49 TFEU or otherwise providing services under Article 56 TFEU. The last two rights also benefit companies incorporated in a Member State of the EU. This freedom would not be fully effective, however, were it not supported by the principle of non-discrimination on the ground of nationality, as enshrined in the above provisions. Firmly established as a cardinal rule of the EU by the Court of Justice, it guarantees that EU migrants are given the same treatment as the nationals of the host Member States with regard to access to and pursuit of an economic activity. Access to, and exercise of, certain economic activities may nevertheless be legitimately restricted by Member States to holders of a diploma or formal qualifications. For that reason, and in order to facilitate the exercise of those activities, the EU legislature undertook an ambitious and complex programme of mutual recognition of professional qualifications, which culminated in the adoption of Directive 2005/36 as amended by Directive 2013/55. Equally, Member States are permitted to restrict to their own nationals access to, and pursuit of, certain activities that involve either the exercise of powers conferred by public law (Article 45(4) TFEU), or the exercise of official authority (Article 51, first paragraph TFEU). However, those exceptions are consistently interpreted narrowly by the Court of Justice, so as to limit their restrictive effects on this fundamental freedom.

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Christian, a Danish national, entered France at the beginning of the year, having accepted the position in Paris of assistant editor of La Taupe, a radical political journal. The association that publishes La Taupe is a non profit-making organisation, which finances the journal through donations and subscriptions. Christian was told when he arrived in France that he would receive remuneration below the minimum wage, but that the organisation would provide him with accommodation. He was joined one month later by Minh, his Vietnamese wife, with whom he had lived in Copenhagen for six years. A former lecturer in employment law from Hanoi Law University, Minh obtained her PhD in Comparative Employment Law at Copenhagen University and hopes to find work in Paris in her field of expertise. She has applied for a post as lecturer in Asian Legal Studies at Paris-Pantheon-Sorbonne University. Can Christian be regarded as a worker and, if so, what are his rights under EU law and those of his wife? Elisa lives in Paris. She is a former horse-riding champion who wants to set up ‘Equus’, an Internet business specialising in selling horse-riding equipment. On the advice of a chartered accountant, she decides to set up this business in London and its subsidiary in Paris, as UK company law does not require the payment of a minimum share capital. What are Elisa’s rights to set up her Internet business in the UK, and could the French authorities object to the creation of its subsidiary in Paris? Christophe is a French citizen. He has successfully completed his Master in Law and his Bar exams at a Paris university. Wanting to take advantage of the opportunities in Eastern Europe, he decides to migrate to Lithuania and join Inga, his new partner, who runs her own family law firm in Vilnius. Christophe wants to join Inga’s law firm and practise law in the Lithuanian courts. What are Christophe’s rights and obligations to establish himself as a practising lawyer in Lithuania?

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PART V

COMPETITION LAW 16 Core Concepts of Competition Law

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17 Substantive Competition Rules Applicable to Undertakings

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18 Enforcement of Competition Rules

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After reading this chapter, you will be able to understand: • • • •

the objectives of EU competition law the concept of ‘undertaking’ the concept of relevant market the concept of ‘effect on trade between Member States’.

16.1 Introduction European competition law has played an essential role in economic integration and the completion of the internal market. The original structure of the Treaty of Rome was evocative in this respect. Prior to the Maastricht Treaty, the competition rules were laid down in the first chapter of Part Three of the EEC Treaty on ‘Community policies’. This was no coincidence but a clear indication that the foundations of the European Community, notably the free movement of goods, services and establishment, could not be effective without rules ensuring fair competition. In essence, the internal market was completed in order to allow firms to compete on a level playing field in all Member States. The essential mission of competition law was clearly enshrined in former Article 3(1)(g) TEC (formerly 3(f) TEEC), namely to ensure that ‘competition in the internal market is not distorted’. The important place originally given to competition law was confirmed in the policy followed by the European institutions. The priority of competition law in the 1960s and 1970s was first to support the dismantling of all State-imposed barriers and restrictions to trade and, subsequently, to prevent companies from endorsing practices, such as market sharing and partitioning, price discrimination or restrictions of parallel trade, which would result in artificially dividing the internal market. Merger control was also introduced in the late 1980s to take account of the growing opportunities for European companies to merge and acquire assets across borders in the newly created internal market. The 1989 Merger Regulation, which aimed at eliminating risks of consumer harm as a result of the creation and strengthening of dominant positions through mergers, gradually led the way to a competition policy with an increased focus on consumer welfare based on a more rigorous economic analysis and on an effects-based approach. In the late 1990s and early 2000s, a new generation of competition regulations on vertical and horizontal agreements enabled the Commission to focus on agreements concluded by companies enjoying market power and more likely to cause consumer harm and damage the internal market, notably hardcore cartels. A more sophisticated economic approach and analysis further led to the adoption in the 2004 Merger Regulation of the ‘substantive test’ which is used to assess whether an economic operation may lead or not to a significant impediment to effective competition (SIEC). It is clear from the

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horizontal merger guidelines and the guidance on the Commission’s enforcement priorities regarding exclusionary abuses of dominant undertakings, that the economic approach with a focus on the maximisation of consumer welfare is now solidly anchored in competition enforcement policy. Competition rules now ensure that consumers benefit from the best prices, quality and diversity of products and services markets can deliver. Yet, they are also crucial in preserving the integrity of the internal market as a level playing field. As a result, European competition rules and policies have a direct impact on the daily lives of consumers and businesses of the European Union. Wider access to air transport at lower prices, the possibility of buying a car in another EU country at a cheaper price, and the reduction in telecommunication costs and roaming charges are among the many benefits directly enjoyed by European consumers. Any business which plans, for example, to set up a distribution network, enter into a cooperation agreement with another business, conclude an agreement on patent licensing, or set up a joint subsidiary with another business can no longer afford to ignore European competition rules without taking the risk of breaching them and dividing the internal market.

16.2 The concept of ‘undertaking’ As the majority of competition rules apply to the behaviour of ‘undertakings’, this term is one of the key concepts in EU competition law. It has the same meaning for the purpose of Articles 101 and 102 TFEU, the Merger Regulation and State aids rules. The lack of definition in the Treaty has allowed the ECJ to construe this term widely and adopt a pragmatic approach which distances itself from its legal and formal meaning.

16.2.1 Irrelevance of the form or legal status Very early on, the Court made it quite clear that, for the purpose of competition rules, an undertaking could not be defined solely in accordance with its legal form or status. In Case 155/73 Sacchi [1974] ECR 409, the Court ruled that an undertaking has to be capable of having an effect on competition whether it was set up for an economic purpose or not. In this case, the undertaking was a limited company on which a Member State had conferred by law the exclusive right to carry out television broadcasts of all kinds including those transmitted by cable. The fact that an undertaking, public or not, may be granted special or exclusive rights by a Member State under Article 106(1) TFEU or is entrusted with the operation of services of general economic interest under Article 106(2) TFEU does not exempt it from the application of the rules contained in Articles 101 and 102 TFEU (paras 14 and 15). It is also irrelevant that the undertaking is a legal or natural person. According to Commission Decision 76/29/EEC ([1976] OJ L6/8) in AOIP/Beyrard, an individual trader (here an inventor who commercialises his invention) can be regarded as an undertaking. The concept can also embrace a trust company set up to police a cartel, as in the Italian flat glass case (Commission Decision 81/881/EEC ([1981] OJ L326/32)) which concerned a company established by four other firms for the sole purpose of supervising a quota-fixing agreement; or a partnership as in GVL (Commission Decision 81/1030/EEC ([1981] OJ L370/49)), a case in which artists were deemed to be ‘commercial partners’ as their works were recorded, broadcast on radio and television

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or performed publicly for the consideration of payment of fees and royalties. Even associations may be regarded as undertakings provided they act as economic operators. Whether the undertaking is private or State-owned is equally irrelevant. Competition rules apply not only to private entities but also to public bodies or corporations, which are directly or indirectly controlled by public central or local authorities. As a result, a German public employment agency operating under statutory powers (see Case C-41/90 Höfner and Elser v Macrotron GmbH [1991] ECR I-1979) and an Italian public placement office with an exclusive right to procure employment (Case C-55/96 Job Centre coop arl [1997] ECR I-7119) were deemed to be undertakings. So was ADP, the Paris Airport Authority, a public undertaking in charge of the management and operation of the Paris airports even though it operated under official powers and occupied government land (Case T-128/98 Aéroports de Paris v Commission [2000] ECR II-3929, para 109 and Case C-82/01 P Aéroports de Paris v Commission [2002] ECR I-9297, paras 68–83). The concept of undertaking is not so much a concept that is determined by the legal status or personality of the entity concerned but rather by the economic nature of its activity.

16.2.2 The economic nature of the activity In its Polypropylene Cartel decision (Commission Decision 86/398/EEC ([1986] OJ L230/1)), the Commission stated that [t]he subjects of [EU] competition rules are undertakings, a concept which is not identical with the question of legal personality for the purposes of company law or fiscal law … It may, however, refer to any entity engaged in commercial activities and in the case of corporate bodies may refer to a parent or to a subsidiary or to the unit formed by the parent and subsidiaries together. This broader interpretation of the term ‘undertaking’ was embraced in Höfner and Elser v Macrotron, in which the Court of Justice stated: It must be observed, in the context of competition law, first that the concept of an undertaking encompasses every entity engaged in an economic activity, regardless of the legal status of the entity and the way in which it is financed and, secondly, that employment procurement is an economic activity. The fact that employment procurement activities are normally entrusted to public agencies cannot affect the economic nature of such activities … It follows that an entity such as a public employment agency engaged in the business of employment procurement may be classified as an undertaking for the purpose of applying the [Union] competition rules. (paras 21–23) As such, an economic activity must involve the offering of goods or services on the market.

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In Case C-475/99 Ambulanz Glöckner v Landkreis Südwestpfalz [2001] ECR 8089, a German medical organisation providing emergency and routine ambulance services for which it received payment from the Land of Rhineland-Palatinate and from insurers was regarded as an undertaking on the ground that

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… [t]he concept of an undertaking, in the context of competition law, covers any entity engaged in an economic activity, regardless of the legal status of the entity or the way in which it is financed … Any activity consisting in offering goods and services on a given market is an economic activity … (para 19) (See also Case C-222/04 Cassa di Risparmio di Firenze and Others EU:C:2006:8, para 108 regarding a banking foundation.)

As services are normally provided for remuneration, they may be classified as ‘economic activities’. This would therefore apply to courses provided by educational establishments financed essentially by private funds since the aim of such establishments is to offer a service for remuneration (see Case C-74/16 Congregación de Escuelas Pías Provincia Betania v Ayuntamiento de Getafe EU:C:2017:135). The fact that an entity is a cooperative set up in accordance with the law of a Member State (Case T-61/89 Dansk Pelsdyravlerforening v Commission [1992] ECR II1931) or that it is a non-profit organisation (see Commission Decision 82/371/EEC ([1982] OJ L167/39) in NAVEWA-ANSAEU regarding an association of water supply companies and Case C-244/94 Fédération Française des Sociétés d’Assurances and others v Ministère de l’Agriculture et de la Pêche [1995] ECR I-4013, paras 14–22 in the case of an organisation managing an optional supplementary social security scheme; Case C-49/07 Motosykletistiki Omospondia Ellados NPID (MOTOE) v Elliniko Dimosio EU:C:2008:376, para 27; and Cassa di Risparmio di Firenze and Others, paras 122–123) does not affect the economic nature of its activity and does not shield it from the application of competition rules. However, where a body’s activities are by ‘their nature, their aim, and the rules to which they are subject, connected with the exercise of powers which are typically those of a public authority’, they cannot be of an economic nature justifying the application of the EU competition rules. Thus, the body concerned cannot be treated as an undertaking within the meaning of those rules. This is the case of Eurocontrol which exercises, on behalf of contracting States, powers of control and supervision of air space and carries out tasks in the public interest in relation to air navigation safety (Case C-364/92 SAT Fluggesellschaft mbH v Eurocontrol [1994] ECR I-43, para 30), including its other activities of assisting national administrations in connection with tendering procedures carried out for the acquisition of equipment and systems in the field of air traffic management, and of technical standardisation (Case C-113/07P SELEX Sistemi Integrati SpA v Commission [2009] ECR I-2207, paras 82, 92–93). The same principle applied to SEPG, a private limited company, which was entrusted by the port authority of Genoa with antipollution surveillance and intervention in the oil port, which are tasks in the public interest and forming part of the essential functions of the State (Case C-343/95 Cali & Figli Srl v Servizi ecologici porto di Genova SpA (SEPG) [1997] ECR I-1547, para 23). Naturally, when an entity performs in parallel activities falling within the exercise of public powers and economic activities, an assessment must be carried out separately for each activity. This assessment might then justify the application of competition rules to

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some but not all of its activities (see MOTOE, concerning a non-profit-making association representing in Greece the International Motorcycling Federation in charge of authorising the organisation of motorcycling events and of entering into sponsorship, advertising and insurance contracts when organising such events itself).

16.2.3 Specific sectors of activities The Court was also called upon to examine the application of competition rules to liberal professions and to insurance and social security funds. 16.2.3.1

The liberal professions For many years, the liberal professions were regarded as operating outside commerce, and therefore law firms or offices were not treated as undertakings. This view is no longer true since the ECJ ruling in Case C-309/99 JCJ Wouters, JW Savelbergh and Price Waterhouse Belastingadviseurs BV v Algemene Raad van de Nederlandse Orde van Advocaten [2002] ECR I-1577.

In Wouters, Savelbergh and Price Waterhouse the Court ruled that members of the Amsterdam bar were undertakings as they

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… offer, for a fee, services in the form of legal assistance consisting in the drafting of opinions, contracts and other documents and representation of clients in legal proceedings. In addition, they bear the financial risks attaching to the performance of those activities since, if there should be an imbalance between expenditure and receipts, they must bear the deficit themselves. (para 48) As such activities clearly consist of offering services on a given market making them economic activities, Members of the Bar are therefore undertakings despite the complexity and technical nature of their services and the fact that the practice of their profession is regulated. This then justifies the application of competition rules to the legal professions.

The same principle applies to members of the medical profession, as ruled in Joined Cases C-180/98 to C-184/98 Pavlov and Others v Stichting Pensioenfonds Medische Specialisten [2000] ECR I-6451. In this case, the Court regarded medical specialists who were members of the National Association of Specialists of the Royal Netherlands Society for the Promotion of Medicine as self-employed economic operators providing services on the market in specialist medical services for which they were paid by their patients and for which they assumed the financial risks attached to this activity (para 76). As with lawyers, the complexity and technical nature of the services they provide and the fact that the exercise of their profession is regulated cannot shield them from the application of competition rules (para 77). Likewise, Italian independent customs agents are regarded as ‘undertakings’ by the Commission (see Commission Decision 93/438/EEC ([1993] OJ L203/27) Consiglio Nazionale degli Spedizionieri Doganali (CNSD), recitals 40–41) and the Courts (Case C-35/96 Commission v Italy [1998] ECR I-3851, para 37 and Case T-513/93 Consiglio Nazionale degli Spedizionieri Doganali v Commission [2000] ECR II-1807, para 37) as [t]hey offer, for payment, services consisting in the carrying out of customs formalities, relating in particular to the importation, exportation and transit of goods, as well as other complementary services such as services in monetary, commercial and fiscal areas.

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In addition, they must assume the financial risks involved in the exercise of those activities and, notably, bear the deficit themselves, should there be an imbalance between expenditure and receipts. 16.2.3.2

Insurance, pension and social security funds A great number of cases also involved insurance, pension and social security funds.

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ca ple In Case C-244/94 Fédération Française des Sociétés d’Assurances and others v Ministère m exa de l’Agriculture et de la Pêche [1995] ECR I-4013, the French federation of insurance companies challenged in the Conseil d’Etat, the highest administrative court, the legality of a decree laying down the organisation and rules for the operation of a supplementary old-age insurance scheme for self-employed farmers, financed by voluntary contributions deductible from taxable earnings. The decree also provided that the scheme was to be managed by the Caisse Centrale de la Mutualité Sociale Agricole (CCMSA), a non-profit-making organisation. Following a preliminary ruling by the Conseil d’Etat, the French government argued before the ECJ that, owing to its nature, CCMSA could not be treated as an undertaking and that the scheme it managed was not competitive in essence since it pursued a social purpose, it was based on the principle of social solidarity, and the legal relations between CCMSA and the persons insured were governed by public law and not by a contract under private law. The Court first noted that membership of the scheme was optional as farmers wishing to supplement their basic pension could opt for better investment between the CCMSA and an insurance company. Secondly, it found that the scheme operated according to the capitalisation method rather than on a redistributive basis, and thirdly that the benefits to which farmers were entitled depended exclusively on the amount of contributions they paid and the financial return on the investments made by CCMSA. Fourthly, the Court considered that, although the scheme had elements of solidarity reflected in the fact that contributions were not linked to the risks incurred, these were limited in scope as a result of the optional nature of the scheme. For those reasons, the Court concluded that CCMSA carried on an economic activity in competition with life assurance companies and, on that basis, that a non-profit-making organization which manages an old-age insurance scheme intended to supplement a basic compulsory scheme, established by law as an optional scheme and operating according to the principle of capitalization in keeping with the rules laid down by the authorities in particular with regard to conditions for membership, contributions and benefits, is an undertaking within the meaning of Article [101] et seq of the Treaty. (para 22)

Following this judgment, in Case C-97/96 Albany International BV v Stichting Bedrijfspensieonfonds Textielindutrie [1999] ECR I-5751, the Court held that … a pension fund charged with the management of a supplementary pension scheme set up by a collective agreement concluded between organisations representing employers and workers in a given sector, of which membership had been made compulsory by the public authorities for all workers in that sector, [was] an undertaking within the meaning of Article [101] et seq of the Treaty. (para 87) The Court applied the same reasoning to a sectoral pension fund responsible for managing a supplementary medical specialists’ pension scheme set up by the medical specialists’ representative body. Although membership was made compulsory by law for all members of that profession, medical specialists could opt to purchase their basic pension either from the fund or from an authorised insurance company, and some of them could be granted exemption from membership with regard to the other components of the pension scheme. Together with the fact that this fund operated on

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the basis of the principle of capitalisation and that the level of its benefits depended on the performance of its investments and was subject to control by the Insurance Board, this was a clear indication that its activity was carried out in competition with insurance companies. Carrying on an economic activity in competition with insurance companies is therefore the key criterion justifying the application of competition rules to such a body managing a pension fund. This in turn can be implied by the ‘[o]ptional affiliation, application of the principle of capitalisation and the fact that benefits depended solely on the amount of the contributions paid by the beneficiaries and on the financial results of the investments made by the managing organisation’ (Albany International BV, para 79). The economic nature of the activity of the organisation managing the fund cannot be altered by the fact that the organisation is non-profit-making, pursues a social objective, partially applies the principle of solidarity, or is subject to restrictions in making investments. By contrast, this is not the case of a body managing a compulsory social security scheme based solely on the principle of national solidarity (Joined Cases C-159 and 160/91 Poucet v Assurances Générales de France (AGP) and Pistre v Caisse Autonome Nationale de Compensation de l’Assurance Vieillesse des Artisans [1993] ECR I-637). In this case, compulsory social protection applied to self-employed persons in nonagricultural and craft occupations against the risks of sickness, old age, death and invalidity. The Court found that all the schemes embraced the principle of solidarity in the fact that: • contributions to the sickness and maternity scheme were proportional to income but benefits were identical for all beneficiaries; • pensions under the old-age pension scheme were funded by those in employment but statutory pension entitlements were not proportional to the contributions paid into the scheme; and • the financial equilibrium of those schemes was guaranteed by a financial contribution from the schemes with a surplus to those with structural financial difficulties. The element of solidarity was even stronger in Case T-319/99 Federación Nacional de Empresas de Instrumentación Cientifica, Médica, Técnica y Dental (FENIM) v Commission [2003] ECR II-360, para 37, which involved an association of undertakings marketing medical goods to Spanish hospitals. The Court of First Instance ruled that SNS, the Spanish Health Service, purchased medical goods and equipment to provide free health services, an activity of a purely social nature, and not for the purpose of offering goods or services. SNS could not be seen as pursuing an economic activity in this respect and therefore could not be regarded as being an undertaking. Likewise, the Italian National Institute for Insurance against Accidents at Work, a body entrusted by law with a scheme providing insurance against accidents at work and occupational diseases, was not deemed an undertaking because the amount of benefits and of contributions was fixed by the State (Case C-218/00 Cisal di Battistello Venanzio & C Sas v Istituto nazionale per l’assicurazione contro gli infortuni sul lavoro (INAIL) [2002] ECR I-691, paras 43–46). This line of cases shows that the distinction between bodies running social security schemes which are regarded as undertakings and those which are not is a fine one.

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What the European authorities focus on to make such distinction are the actual functions of the entity. The difficulty in making this distinction is particularly well illustrated in the recent case of Dôvera zdravotná poistʼovňa, a.s. v European Commission (Case T-216/15 EU:T:2018:64), in which the General Court had to examine ‘whether the Commission made an error of assessment in concluding … that the profit-making objective pursued by health insurance companies and the competition elements present in the Slovak compulsory health insurance sector did not call into question the predominant social, solidarity and regulatory features indicating the non-economic nature of the activities performed by health insurance companies’ (para 54). While concurring with the Commission that the Slovak compulsory health insurance scheme had ‘predominant social, solidarity and regulatory features’ (para 58), it noted that two other elements existed that called into question the non-economic nature of the activities of the companies concerned. Indeed, the Slovak law allowed the health insurance companies to make, use and distribute profits even if this ability was regulated more strictly than in normal commercial sectors, and allowed a certain amount of competition with regard to the quality and services offered (paras 59–67). Consequently, the Court rightly concluded that the Commission made an error of assessment and that the activity of health insurance companies in Slovakia was economic in nature (paras 60–70).

16.2.4 Single economic entity Whatever its form or legal status, whether it has a separate legal personality or not, an entity will be treated as an undertaking for the purpose of EU competition rules if it constitutes a single economic entity under the control of the same person enjoying sufficient autonomy in determining its conduct on the market. As the Court put it in Case 170/83 Hydrotherm v Compact [1984] ECR 2999: In competition law, the term ‘undertaking’ must be understood as designating an economic unit for the purpose of the subject-matter of the [competition rule] in question even if in law that economic unit consists of several persons, natural or legal. (para 11) This will be the case of ‘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’ (Case 15/74 Centrafarm BV and de Peijper v Sterling Drug Inc [1974] ECR 1147, para 41; Case 66/86 Ahmed Saeed Flugreisen and others v Zentrale zur Bekämpfung unlauteren Wettbewerbs [1989] ECR 803, para 35; Case T-203/01 Michelin v Commission [2003] ECR II 4071, para 290; Case T-827/14 Deutsche Telekom AG v Commission EU:T:2018:930 and Case T-851/14 Slovak Telekom, a.s. v Commission EU:T:2018:929: Deutsche Telekom holding 51% of Slovak Telekom’s shares). As the General Court put it in Case T-112/05 Akzo Nobel and Others v Commission [2007] ECR II-5049, para 64 and Case T-392/09 garantovaná a.s. v European Commission EU:T:2012:674, para 31, although those aspects are not the only ones covered by the concept of the business policy of a subsidiary, the existence of a single economic entity among a number of companies forming part of a group might be deducted from the capacity of a parent company to influence the pricing policy of its subsidiary (Case 48/69 Imperial Chemical Industries Ltd v Commission (ICI) [1972]

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ECR 619, para 137 and Case 52/69 Geigy v Commission [1972] ECR 787, para 45), production and distribution activities (Joined Cases 6/73 and 7/73 Istituto Chemioterapico Italiano S.p.A. and Commercial Solvents Corporation v Commission [1974] ECR 223, paras 37 and 39–41), sales objectives, gross margins, sales costs, cashflow, stocks and marketing (Case T-102/92 Viho Europe BV v Commission [1995] ECR II-17, para 48 – see ‘Case example’ below). Equally, where a parent company has a 100% shareholding in a subsidiary, the parent company can exercise a decisive influence over the conduct of the subsidiary (see ICI, paras 136–137), and there is a rebuttable presumption that the parent company does exercise a decisive influence over the conduct of its subsidiary (see Case C-107/82 AEG-Telefunken v Commission EU:C:1983:293, para 50; Case C-286/98 P Stora Kopparbergs Bergslags v Commission EU:C:2000:630, para 29; Case C-90/09 General Química and Others v Commission EU:C:2011:21, para 39; Joined Cases C-201/09 P and C-216/09 ArcelorMittal Luxembourg v Commission and Commission v ArcelorMittal Luxembourg and Others EU:C:2009:547, para 97; Case C-521/09 Elf Aquitaine v Commission EU:C:2011:620, para 56; Case T-523/15 Italmobiliare SpA and Others v Commission EU:T:2019:499, para 45). The determination of the economic and commercial strategy of the subsidiary by the parent company can also take the form in the latter exercising all the voting rights associated with its subsidiary’s shares, in particular in combination with a very high majority stake in the share capital of that subsidiary, even if it does not hold all or virtually all of the subsidiary’s share capital (see Case T-419/14 The Goldman Sachs Group, Inc v European Commission EU:T:2018:445 in the case of an investment bank).

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ca ple In Case C-73/95P Viho Europe BV v Commission of the European Communities [1996] m exa ECR I-5457, a group of subsidiaries which operated under the tight control of their parent company was treated as a single entity and any ‘agreement’ between them amounted in effect to a ‘distribution of tasks within a single economic entity’. Viho Europe BV, a company which marketed office equipment on a wholesale basis and which imported and exported that equipment, attempted without success to enter into business relations with Parker Pen Ltd – a producer of a wide range of writing utensils, which it sold throughout Europe through subsidiary companies or independent distributors – and to obtain Parker products on conditions equivalent to those granted to Parker’s subsidiaries and independent distributors. Viho lodged a complaint with the Commission in which it claimed that Parker was prohibiting the export of its products by its distributors, dividing the common market into national markets and maintaining artificially high prices for Parker products on those national markets. In a second complaint, it claimed that the distribution policy pursued by Parker, whereby it required its subsidiaries to restrict the distribution of Parker products to their allocated territories, was in breach of Article 101 TFEU on prohibited anti-competitive agreements. Having analysed the nature of the relationship between Parker Ltd and its subsidiaries, and having notably noted that Parker owned 100% of the capital of its subsidiaries and that the operation, the sales and marketing activities of its subsidiary companies were directed and controlled by an area team which was appointed by Parker (para 48), the Court concurred with the Commission that the Parker group could be classified as ‘one economic unit within which the subsidiaries do not enjoy real autonomy in determining their course of action in the market’ (para 49). This sort of situation arises not only in the case of relationships between parent and subsidiary companies but also in relationships between a company and its commercial representative or between a principal and its agent. In Joined Cases 40–48, 50, 54–56,

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111, 113 and 114/73 Coöperatieve Vereniging ‘Suiker Unie’ UA and others v Commission (Re Sugar Cartel) [1975] ECR 1663, the Court stated that … if such an agent works for his principal he can in principle be regarded as an auxiliary organ forming an integral part of the latter’s undertaking bound to carry out the principal’s instructions and thus, like a commercial employee, forms an economic unit with this undertaking. (para 480) In that regard, unlike dealers acting as agents under exclusive agency agreements for a manufacturer’s subsidiary primarily engaged in leasing (Case C-266/93 Bundeskartellamt v Volkswagen AG and VAG Leasing GmbH [1995] ECR I-3477, para 19), genuine commercial agents whose commercial freedom is limited and who bear no commercial risks (see Case T-325/01 DaimlerChrysler AG v Commission [2005] ECR II-3319, paras 100–101) cannot be deemed to be independent undertakings. Nor can company employees, taken individually or collectively, ‘[s]ince they are, for the duration of [the employment] relationship, incorporated into the [undertaking] and thus form an economic unit with [it]’ (see Case C-22/98 Criminal proceedings against Becu, Verweire, Smeg NV and Adia Interim NV [1999] ECR I-5665, paras 26–27). From this it follows that, where an entity within a group of companies does not enjoy real autonomy to determine its own course of action, ‘relations within an economic unit cannot amount to an agreement or concerted practice between undertakings which restricts competition within the meaning of Article [101(1)] of the Treaty’ (Viho Europe BV, para 51) (see 17.1). However, the conduct of such a unit on the market is liable to come under Article 102 TFEU on abuse of a dominant position (Ahmed Saeed Flugreisen, para 35) (see 17.2). This also means that companies deemed to be an economic unit are jointly and severally responsible for their united action or conduct (ICI and CSC, para 41). Thus, the conduct of a subsidiary may be attributed to a parent company ‘where the subsidiary does not decide independently upon its own conduct in the market but carries out, in all material respects, the instructions given to it by the parent company’ (ICI, para 133 and Case T-65/89 BPB Industries Plc and British Gypsum Ltd v Commission [1993] ECR II-389, para 149), ‘having regard in particular to the economic, organisational and legal links between those two legal entities’ (see Case C97/08 P Akzo Nobel and Others v Commission [2009] ECR I-8237, paras 58 and 72; Joined Cases C-628/10 P and C 14/11 P Alliance One International and Standard Commercial Tobacco v Commission and Commission v Alliance One International and Others EU:C:2012:479, para 43; Case C-172/12 P EI du Pont de Nemours v Commission EU:T:2018:445, para 41 and Case T-91/13 LG Electronics, Inc v European Commission EU:T:2015:609, para 34; Case T-523/15 Italmobiliare SpA and Others v Commission EU:T:2019:499, paras 42–44). Although it is not necessary to establish the personal involvement of the parent company in the infringement (EI du Pont de Nemours, para 42 and LG Electronics, para 35), it must be demonstrated, in order to be able to impute the conduct of a subsidiary to the parent company, that the parent company is not only in a position to exercise decisive influence over the conduct of its subsidiary but also that that influence was actually exercised (EI du Pont de Nemours, para 44 and LG Electronics, para 36). The exercise of a decisive influence by a parent company over its subsidiary’s conduct on the market can be determined on the basis of ‘all the relevant factors relating to the economic, organisational and legal links which tie the subsidiary to the parent company, which may vary from case to case and cannot therefore be set out in an exhaustive list’ (EI du Pont de Nemours, para 43 and LG Electronics, para 37).

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A company may also be liable for the conduct of an independent agent, such as a third party independent sales representative, who provides services to that company as its exclusive agent and assumes no economic risks (see Case T-8/16 Toshiba Samsung Storage Technology Corp and Toshiba Samsung Storage Technology Korea Corp v European Commission EU:T:2019:522, paras 347–359). Equally, according to the concept of economic continuity, a company, which has acquired all the shares in companies which participated in a prohibited cartel and continued their commercial activities after dissolving the acquired companies, may be held liable for the damage caused by that cartel (Case C-724/17 Vantaan kaupunki v Skanska Industrial Solutions Oy and Others EU:C:2019:204). Indeed, as the Court put it in previous cases (such as Case C-280/06 ETI and Others EU:C:2007:775, para 42; Case C-448/11 SNIA v Commission EU:C:2013:801, para 22 and Case C-434/13 Commission v Parker Hannifin Manufacturing and Parker-Hannifin EU:C:2014:2456, para 40), when an entity that has committed an infringement of the competition rules is subject to a legal or organisational change, this change does not necessarily create a new undertaking free of liability for the conduct of its predecessor that infringed the competition rules, when, from an economic point of view, the two are identical. With regard to the actual enforcement of competition rules (see Chapter 18), as the Court recently confirmed in Skanska, the concept of ‘undertaking’, as an autonomous concept of EU law, cannot have a different scope with regard to the imposition of fines by the Commission under Article 23(2) of Regulation No 1/2003 as compared with actions for damages for infringement of EU competition rules. (para 47)

‘Undertaking’

Form or legal status

Public or private

Sufficient autonomy to determine its conduct on the market

Activity

Natural or legal person

Of an economic nature involving the offering of goods and services

If yes, then the entity is an undertaking Liberal professions Insurance and pension funds

Figure 16.1 Undertakings

If no, then the entity is not an undertaking Insurance and pension funds based on solidarity principle

Connected with the exercise of powers

Yes

No

If yes, then the entity is not an undertaking

Separate entities

Single economic entity

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16.3 Market definition When considering suspected infringements of competition rules, the relevant market is the first element that competition authorities, whether European or national, must analyse and assess, as the definition of the relevant market will help determine the scope of application of competition rules in respect of restrictive agreements, abuses of dominant positions and mergers.

16.3.1 The importance of the concept of relevant market The importance of defining the relevant market was recognised in the early case law of the Court of Justice.

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ca ple Case 6/72 Europemballage Corporation and Continental Can Company Inc v Commission m exa [1973] ECR 215. On 9 December 1971, the Commission adopted a decision accusing Continental Can, an American company manufacturing metal packages, paper and plastic packaging and machines for the production and use of these packages, of abusing its dominant position allegedly held through SLW AG, its German subsidiary, in the market for light metal containers for meat, meat products, fish and crustaceans and in the market for metal closures for glass jars. According to Article 1 of the decision, the abuse consisted in Continental Can having acquired in April 1970, through its subsidiary Europemballage, about 80% of the shares and debentures of the company Thomassen and Drijver-Verbliva NV (TDV). By this acquisition, the Commission alleged, competition in the abovementioned packaging product markets was practically eliminated in a substantial part of the then Common Market. After stressing that … the definition of the relevant market is of essential significance, for the possibilities of competition can only be judged in relation to those characteristics of the products in question by virtue of which those products are particularly apt to satisfy an inelastic need and are only to a limited extent interchangeable with other products[,] (para 32) the Court quashed the Commission’s decision on the ground that it did not … give any details of how these three markets [differed] from each other, and must therefore be considered separately. Similarly, nothing [was] said about how these three markets [differed] from the general market for light metal containers, namely the market for metal containers for fruit and vegetables, condensed milk, olive oil, fruit juices and chemico-technical products. In order to be regarded as constituting a distinct market, the products in question must be individualized, not only by the mere fact that they are used for packing certain products, but by particular characteristics of production which make them specifically suitable for this purpose. Consequently, a dominant position on the market for light metal containers for meat and fish cannot be decisive, as long as it has not been proved that competitors from other sectors of the market for light metal containers are not in a position to enter this market, by a simple adaptation, with sufficient strength to create a serious counterweight. (para 33)

Generally, however, the ECJ would uphold the Commission’s definition of the relevant market. The Commission will of course tend to define the market narrowly where the effect of doing so will be to enlarge a given firm’s market share. Illustration of this trend can be found in cases such as Case 226/84 British Leyland plc v Commission [1986] ECR 3263, where the ECJ upheld the Commission’s finding that British Leyland held a form of administrative monopoly under British rules whereby someone seeking to register commercially imported vehicles for use on UK roads had to produce a certificate of conformity certifying that the vehicle conformed

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to a previously approved type vehicle to be issued by the manufacturer of the vehicle on the basis of the national type approval certificate. The relevant market was not cars, nor even left-hand drive cars but national type approval certificates for left-hand drive cars. In many instances, more than one relevant product market will be identified as, for instance, in Case T-30/89 Hilti AG v Commission [1991] ECR II-1439, where Hilti, the then largest European producer of powder-actuated fastening (PAF) nail guns, nails and cartridge strips, which carried on its main manufacturing operations in Liechtenstein where it was incorporated but also in the United Kingdom and other European countries, was found to be in a dominant position in not one (construction fastening systems as argued by Hilti) but three relevant product markets. The Court of First Instance (now General Court) agreed that [i]n order to determine, therefore, whether Hilti, as a supplier of nail guns and of consumables designed for them, enjoys such power over the relevant product market as to give it a dominant position within the meaning of Article [102], the first question to be answered is whether the relevant market is the market for all construction fastening systems or whether the relevant markets are those for PAF tools and the consumables designed for them, namely cartridge strips and nails. The Court takes the view that nail guns, cartridge strips and nails constitute three specific markets. Since cartridge strips and nails are specifically manufactured, and purchased by users, for a single brand of gun, it must be concluded that there are separate markets for Hilti-compatible cartridge strips and nails, as the Commission found in its decision (paragraph 55). (paras 65 and 66) Equally, in Case T-201/04 Microsoft Corp v Commission EU:T:2007:289, three separate product markets for operating systems were identified: client PC operating systems, work group server operating systems and streaming media players. In contrast, in Case T-286/09 Intel Corp v Commission EU:T:2014:547 (see below 17.3.3.2), the relevant product market was identified as that of the x86 CPU as a key component of any computer for overall performance and cost of the system rather than that of three separate x86 CPU markets, namely the market for desktop computers, the market for notebook computers and the market for servers.

16.3.2 Purpose of market definition In 1997 the Commission introduced a Notice on the definition of relevant market for the purposes of Community competition law ([1997] OJ C372/5) (‘the Notice’) which offers valuable guidance on the method used by the Commission to define the relevant market. Market definition is viewed as … a tool to identify and define the boundaries of competition between firms. It serves to establish the framework within which competition policy is applied by the Commission[,] and its main purpose … is to identify in a systematic way the competitive constraints that the undertakings involved face. The objective of defining a market in both its product and geographic dimension is to identify those actual competitors of the undertakings involved that are capable of constraining those undertakings’

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behaviour and of preventing them from behaving independently of effective competitive pressure. It is from this perspective that the market definition makes it possible inter alia to calculate market shares that would convey meaningful information regarding market power for the purposes of assessing dominance or for the purposes of applying Article [101]. This objective of defining the relevant market is further confirmed in the DG Competition discussion paper on the application of Article 82 of the Treaty to exclusionary abuses of December 2005 (para 12). In this respect, ‘relevant market’ cannot be equated to the usual understanding of markets, such as the area within which a company sells its products or the industry or sector where it operates. Rather, the concept of relevant market ‘is closely related to the objectives pursued under [Union] competition policy’ and will be regarded in light of the nature of the competition inquiry, ie prospective as in the case of merger control or analytical in the case of other types of inquiries, notably abuse of a dominant position by a company or group of companies or in the application of Article 101 TFEU ‘in particular, in determining whether an appreciable restriction of competition exists or in establishing if the condition pursuant to Article [101(3)(b)] for an exemption from the application of Article [101(1)] is met’.

16.3.3 Definition of relevant market The concept of relevant market can be broken down into three separate issues: the relevant product market, the relevant geographic market, and (very rarely) the relevant temporal market. 16.3.3.1

The relevant product market The Notice defines the relevant product market as a market that comprises all those products and/or services which are regarded as interchangeable or substitutable by the consumer, by reason of the products’ characteristics, their prices and their intended use. (para 7) The key issue for the Commission and the Court is interchangeability: if the consumer regards two different products as being interchangeable, then they are within the same product market. But how is interchangeability to be measured? The Court has suggested two ways: either by checking the cross-elasticity of demand between the products alleged to be within the relevant product market; or to look at the special features of the goods in question, such as their physical characteristics or the use to which the purchaser will put them.

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ca ple In Case 27/76 United Brands v Commission [1978] ECR 207, United Brands, an American m exa company which was at the time the largest group on the world banana market and accounting for 35% of world exports in 1974, was alleged to have abused its dominant position in the banana market. The Court dismissed United Brands’ argument that bananas were in the same market as other fruit because of their limited interchangeability. The physical characteristics approach can be seen in the United Brands case where the Court looked at the special features of bananas. The Court notably observed that

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[f]or the banana to be regarded as forming a market which is sufficiently differentiated from other fruit markets it must be possible for it to be singled out by such special features distinguishing it from other fruits that it is only to a limited extent interchangeable with them and is only exposed to their competition in a way that is hardly perceptible. (para 22) The studies of the banana market on the Court’s file show that on the latter market there is no significant long term cross-elasticity anymore than – as has been mentioned – there is any seasonal substitutability in general between the banana and all the seasonal fruits, as this only exists between the banana and two fruits (peaches and table grapes) in one of the countries (West Germany) of the relevant geographic market. (para 28) As far as concerns the two fruits available throughout the year (oranges and apples) the first are not interchangeable and in the case of the second there is only a relative degree of substitutability. (para 29) This small degree of substitutability is accounted for by the specific features of the banana and all the factors which influence consumer choice. (para 30) The banana has certain characteristics, appearance, taste, softness, seedlessness, easy handling, a constant level of production which enable it to satisfy the constant needs of an important section of the population consisting of the very young, the old and the sick. (para 31)

The particular use approach can also be seen in Istituto Chemioterapico Italiano (ICI) and Commercial Solvents Corporation (CSC). Zoja, a customer of CSC and ICI, had been refused a supply of aminobutanol as a raw material for the manufacture of ethambutol and ethambutol-based specialities used as an anti-tuberculosis drug. Without it, Zoja was unable to produce its own goods based on other raw materials without making expensive and difficult changes to its installations and manufacturing processes. CSC and ICI disputed the Commission’s findings that CSC held a dominant position in the world market of the raw materials for the production of ethambutol, namely nitropropane and aminobutanol, on the ground that ethambutol could be produced from other raw materials than those produced by CSC. On the other hand, CSC asserted the relevant market to be that of anti-tuberculosis drugs in which ethambutol was ‘in competition with other drugs that were to a large extent interchangeable’. Furthermore according to CSC, ‘since a market in ethambutol [did] not exist, it [was] impossible to establish a separate market in the raw material for the manufacture of this product’ (para 19). Focusing on the inability of Zoja’s to use other raw materials to manufacture derivatives such as ethambutol, the Court ruled that [c]ontrary to the arguments of the applicants it is in fact possible to distinguish the market in raw material necessary for the manufacture of a product from the market on which the product is sold. An abuse of a dominant position on the market in raw materials may thus have effects restricting competition in the market on which the derivatives of the raw material are sold and these effects must be taken into account in considering the effects of an infringement, even if the market for the derivative does not constitute a self-contained market … (para 22) Likewise in Case 22/78 Hugin Kassaregister AB and Hugin Cash Registers Ltd v Commission [1979] ECR 1869, the Commission had found that Hugin was dominant in the market for spare parts for its own cash registers because Liptons, an independent company which serviced the machines outside the Hugin distribution system, could not get spares from anywhere else without committing a breach of copyright. Hugin challenged the Commission’s definition of the relevant market, notably on the ground that ‘the supply of spare parts and of maintenance services is certainly not a separate

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market but is an essential parameter of competition in the market for cash registers as a whole’ (para 4). The Court firstly observed that [w]hile there certainly exists amongst users a market for maintenance and repairs which is distinct from the market in new cash registers, it is essentially a market for the provision of services and not for the sale of a product such as spare parts … (para 6) It further stated at paragraph 7 that there exists a separate market for Hugin spare parts at another level, namely that of independent undertakings which specialize in the maintenance and repair of cash registers, in the reconditioning of used machines and in the sale of used machines and the renting out of machines … and finally, that [i]t is, moreover, established that there is a specific demand for Hugin spare parts, since those parts are not interchangeable with spare parts for cash registers of other makes. (para 7) This led the Court to find that there was a narrow market for Hugin spare parts. A difficult case was that of Case 85/76 Hoffmann-La Roche & Co AG v Commission [1979] ECR 461 because here two groups of vitamins, C and E, could be used for two different purposes. They could be used for bio-nutritive purposes (ie in health products) in which case they could not be interchanged; but they could also be used as anti-oxidants (preservatives in foodstuffs) where they could be interchanged with other products. Nevertheless, the Commission, upheld by the ECJ, persisted in defining the product market as narrowly as possible, though it overlooked the fact that had the applicants abused their power in one market, eg by raising the price of the product unilaterally, they would have left themselves open to competitive attack in the other. Regarding the way the market definition will be conducted, the Commission will inquire into demand substitutability (as in the United Brands case; paras 15–19 of the Notice), supply substitutability (as in the Continental Can case; paras 20–23 of the Notice) and potential competition (para 24 of the Notice). In applying these principles, the Commission has adopted the SSNIP test, which stands for ‘Small but Significant and Non-transitory Increase in Prices’. Indeed in para 17 of the Notice, the Commission indicates that [t]he question to be answered is whether the parties’ customers would switch to readily available substitutes or to suppliers located elsewhere in response to a hypothetical small (in the range 5% to 10%) but permanent relative price increase in the products and areas being considered. If [demand] substitution were enough to make the price increase unprofitable because of the resulting loss of sales, additional substitutes [products] and areas are included in the relevant market. The Commission considers that the similarity of products’ characteristics and intended use are no longer sufficient to demonstrate that two products are demand substitutes. This is equally the case for functional interchangeability (as used by the ECJ in the Continental Can case) as the responsiveness of customers to price changes may be determined by other factors. The Commission will consider evidence of substitution in the recent past, quantitative econometric tests, the views of consumers

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and competitors, consumer preferences, barriers and costs associated with switching demand to potential substitutes and different categories of customers and price discrimination (see paras 38–43). The SSNIP test was mentioned for the first time by the General Court in Case T-340/ 03 France Télécom SA v Commission [2007] ECR II-107, in which France Télécom challenged the Commission’s findings in its 2005 Wanadoo decision (Case COMP/ 38.233 Wanadoo Interactive) that the French market for high-speed internet access for residential customers was the relevant market. Besides referring to the ECJ case law regarding characteristics and use of products for the identification of their substitutability (paras 78–80), the General Court indeed stated that … the assessment of demand substitution entails a determination of the range of products which are viewed as substitutes by the consumer. One way of making this determination can be viewed as a speculative experiment, postulating a hypothetical small but lasting change in relative prices and evaluating the likely reactions of customers to that increase. In paragraph 17 of the notice, the Commission states ‘[t]he question to be answered is whether the parties’ customers would switch to readily available substitutes … in response to a hypothetical small (in the range 5 to 10%) but permanent relative price increase in the products and areas being considered’. (para 87) The Court then concluded that … the Commission was right to find that a sufficient degree of substitutability between high-speed and low-speed access did not exist and to define the market in question as that of high-speed internet access for residential customers. (para 91) 16.3.3.2

The relevant geographic market According to the 1997 Notice: The relevant geographic market comprises the area in which the undertakings concerned are involved in the supply and demand of products or services, in which the conditions of competition are sufficiently homogeneous and which can be distinguished from neighbouring areas because the conditions of competition are appreciably different in those area. (para 8) In the United Brands case, the ECJ stressed the need to consider a clearly defined geographic area in which the product is marketed and where the conditions are sufficiently homogenous for the effect of the economic power of the undertaking concerned to be able to be evaluated. (para 11) However, the Court did not identify which issues are relevant in defining the geographic market, other than saying that [t]he conditions for the application of article [102] to an undertaking in a dominant position presuppose the clear delimitation of the substantial part of the [internal] market in which it may be able to engage in abuses which hinder effective competition and this is an area where the objective conditions of competition applying to the product in question must be the same for all traders. (para 44) Two cases where there was a conveniently defined geographical market involving two Member States are, first, Decision 89/205/EEC in Case Magill TV Guide/ITP, BBC

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and RTE ([1989] OJ L78/43) where Magill challenged the refusal of the three broadcasting companies to license the copyright in their programme listings for Northern Ireland and Eire, all three stations being receivable either side of the Irish border. The Commission Decision was confirmed by the General Court in Case T-69/ 89 Radio Telefis Eireann v Commission [1991] ECR II-489 (para 64). Secondly, in the BPB Industries plc case (Decision 89/22/EEC [1989] OJ L10/50), the Commission treated the whole of the Irish island as the relevant geographical market in holding that the two companies, BPB Industries and British Gypsum Ltd, were in breach of former Article 86 TEEC (now Article 102 TFEU) by operating a system of fidelity rebates and more favourable delivery dates to those builders’ merchants who stocked their products only, the market share being 90% of the market for plasterboard. However, not all cases are as simple. In Virgin/British Airways (Decision 2000/74/ EC [2000] OJ L30/1), taking into account that the ‘distribution of airlines tickets takes place at national level’ and that ‘airlines normally purchase the services for distributing those tickets on a national basis’, the Commission defined the geographic market for air travel agency services as the UK only since [t]ravel agents tend to operate within national boundaries, since customers normally book tickets in their country of residence. In the present case, customers residing in the United Kingdom purchase their tickets from travel agents in the United Kingdom; transactions are generally made in pounds sterling; and travel agents operate on the basis that the markets they are serving are delineated on national boundaries. The carriers therefore market their services and purchase air travel agency services within the same boundaries. (para 78) The Commission’s view was subsequently upheld by the General Court in Case T-219/ 99 British Airways Plc v Commission [2004] 4 CMLR 1008. After reiterating that [a]s for the geographic market to be taken into consideration, consistent case-law shows that it may be defined as the territory in which all traders operate in the same or sufficiently homogeneous conditions of competition in so far as concerns specifically the relevant products or services, without it being necessary for those conditions to be perfectly homogeneous (Case T-83/91 Tetra Pak v Commission [1994] ECR II-755, paragraph 91, confirmed on appeal by judgment in Case C333/94 P Tetra Pak v Commission (Tetra Pak II) [1996] ECR I-5951) […] (para 108) and after observing that [i]t can hardly be denied that, in the overwhelming majority of cases, travellers reserve airline tickets in their country of residence. Although BA has argued that not all tickets sold by travel agents in the United Kingdom are necessarily sold to residents of that country, it has acknowledged that transactions taking place outside the United Kingdom could not be quantified […] (para 109) the Court concluded that [i]t does not therefore appear that the Commission erred in defining the relevant geographic market as the United Kingdom market, for the purposes of demonstrating that BA held a dominant position on that market in its capacity as the purchaser of air travel agency services provided by agents established in the United Kingdom. (para 116) This case reflects the Commission’s approach to the geographic market definition as explained at length in its Notice on market definition. As the Commission explains,

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… it will take a preliminary view of the scope of the geographic market on the basis of broad indications as to the distribution of market shares between the parties and their competitors, as well as a preliminary analysis of pricing and price differences at national and [EU] or EEA level. This initial view is used basically as a working hypothesis to focus the Commission’s enquiries for the purposes of arriving at a precise geographic market definition. (para 28) On that basis, the Commission will notably take into consideration the following types of evidence to define the relevant geographic market, ranging from a local to a global dimension (paras 44–50): • past evidence of orders to other areas; • basic demand characteristics; • views of customers and competitors; • geographic patterns of demand; • trade flows; • barriers and switching costs; and • the continuing process of integration. In many cases, the Commission and Court both seem to assume that the geographical market cannot extend beyond the EU. However, cases such as Microsoft or Intel show that the geographical market can be defined as worldwide. 16.3.3.3

The relevant temporal market Although this dimension is generally ignored and is not mentioned in the Commission Notice, the relevant market can also be defined by reference to time. Though perhaps it should have done so, the Commission did not consider the relevant temporal market in the United Brands case where there was evidence of seasonal fluctuations in the demand for bananas. Equally the Court’s view was that there was no seasonable substitutability between the banana and other fruits ‘since the banana is a fruit which is always available in sufficient quantities’ (paras 26 and 27). However, the Commission did so in Ardolie Belanger Gemeenschap (ABG) BV/Oil Companies Operating in the Netherlands (Decision 77/327/EEC [1977] OJ L117/1), where it took into account a short-term crisis in the oil industry in the early 1970s. In this Decision, the Commission accused Benzine Petroleum Maatschapij BV of having abused its dominant position on the market in question by reducing its supplies to ABG substantially and proportionately to a much greater extent than in relation to all its other customers and of having been unable to provide any objective reasons for its behaviour.

Importance of the concept The possibilities of competition can only be judged in relation to the relevant market (Case 6/72 Europemballage and Continental Can v Commission)

Purpose of market definition (1997 Commission Notice on the definition of relevant market) a tool to identify and define boundaries of competition between firms to identify competitive constraints faced by those firms

RELEVANT MARKET

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Definition Relevant product market (demand and supply substitutability of products) (Case 27/76 United Brands v Commission) Relevant geographic market (Case T-219/99 British Airways Plc v Commission) Relevant temporal market (Case 27/76 United Brands v Commission)

Figure 16.2 Relevant market

16.4 The concept of ‘effect on trade between the Member States’ Articles 101 and 102 TFEU require there to be a conduct or an abuse of a dominant position affecting trade between Member States. Originally developed and clarified by the EU courts, the concept was ‘codified’ by the Commission in its 2004 Notice on Guidelines on the effect on trade concept contained in Articles 81 and 82 of the Treaty ([2004] OJ C101/81) (‘the 2004 Notice’), setting out a methodology for, and guidance on, its application, and spelling out ‘a rule indicating when agreements are in general unlikely to be capable of appreciably affecting trade between Member States (the non-appreciable affectation of trade rule or NAAT-rule)’ (para 3). As specified very clearly in para 4 of the 2004 Notice, a clear distinction is made between this concept which deals with ‘the ability of agreements to appreciably affect trade between Member States’ and the concept of appreciable restriction of competition under Article 101(1) TFEU, which is covered under the de minimis rule in the 2014 Commission Notice on agreements of minor importance which do not appreciably restrict competition under Article 101(1) of the Treaty on the Functioning of the European Union (De Minimis Notice) (see below 17.2.2.2).

16.4.1 The purpose of the concept This is an important requirement as it helps to define the boundary between Union and national competition law (where the Member States have retained some autonomy) (see Case 56 and 58/64 Consten and Grundig v Commission [1966] ECR 299, 341). As clearly stated in paragraph 12 of the 2004 Notice: The effect on trade criterion is an autonomous [EU] law criterion, which must be assessed separately in each case. It is a jurisdictional criterion, which defines the scope of application of [EU] competition law. [EU] competition law is not applicable to agreements and practices that are not capable of appreciably affecting trade between Member States. Therefore, the scope of application of Articles 101 and 102 TFEU is confined to agreements and practices that are capable of (see below 16.4.2) having a minimum

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level effect or, in other words, an ‘appreciable’ effect (see below 16.4.3) on cross-border trade within the EU. While alleged restrictions of competition may provide a clear indication that an agreement or a practice may affect trade between Member States, it cannot be assumed that non-restrictive agreements may not have cross-border effects within the EU. As a result, according to the 2004 Notice, [i]t is not necessary, for the purposes of establishing [EU] law jurisdiction, to establish a link between the alleged restriction of competition and the capacity of the agreement to affect trade between Member States. (para 16) The notion of ‘trade between the Member States’ implies an impact on cross-border economic activities involving at least two Member States, either whole or part thereof, or where the relevant market is national or regional. In this respect, it has to be clearly differentiated from the notion of relevant geographic market (see above 16.3.3.2). The former is to be understood in its wider understanding consistent with the fundamental freedoms of movement of goods, services, persons and capital, and the competitive structure of the internal market.

16.4.2 Definition and interpretation of the concept Articles 101(1) and 102 TFEU refer to agreements or practices that ‘may affect trade between the Member States’. As mentioned in paragraph 23 of the 2004 Notice, ‘[t]he function of the notion “may affect” is to define the nature of the required impact on trade between Member States’. The ECJ gave a wide interpretation to the phrase, thus extending the scope of application of EU competition law. The test was that laid down in Case 56/65 Société Technique Minière v Maschinenbau Ulm (STM) [1966] ECR 235 which concerned an agreement containing a clause ‘granting an exclusive right of sale’. In this case, the Court stated that … 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 … (at 249) ‘in such a way as to cause concern that [it] might hinder the attainment of a single market between Member States’ (as added by the Court in Case 5/69 Völk v SPRL Ets J Vervaecke [1969] ECR 295, para 5). Moreover, that effect must not be insignificant. This phrasing is now well anchored in the case law of the Court (see Cases C-306/96 Javico International and Javico AG v Yves Saint Laurent Parfums SA (YSLP) [1998] ECR I-1983, para 16; Joined Cases C-215/96 and C-216/96 Bagnasco and Others [1999] ECR I-135, para 47 and Case C-475/99 Firma Ambulanz Glöckner v Landkreis Südwestpfalz [2001] ECR I-8089, para 48; Case C-407/04 Dalmine v Commission EU:C:2007:53, para 90 and Case C-177/16 Autortiesību un komunicēšanās konsultāciju aģentūra / Latvijas Autoru apvienība v Konkurences padome EU:C:2017:689, para 27). As the Court explained further in STM, [t]herefore, in order to determine whether an agreement … comes within the field of application of article [101], it is necessary to consider in particular whether it is capable of bringing about a partitioning of the market in certain products between member states and thus rendering more difficult the interpenetration of trade which the treaty is intended to create. (at 249) (emphasis added)

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Thus, Union law covers any agreement or practice which might constitute a threat to freedom of trade between Member States in such a manner as to harm the attainment of the objectives of a single market, in particular ‘by sealing off domestic markets or by affecting the structure of competition within the [single] market’ (see Case 22/78 Hugin v Commission [1979] ECR 1869, para 17; Case C-475/99 Ambulanz Glöckner [2001] ECR I-8089, para 47; Case C-407/04 Dalmine EU:C:2007:53, para 90; and Case C-177/16 Autortiesību EU:C:2017:689, para 27). The test for assessing effect on trade, the so-called STM (Société Technique Minière) test, is therefore threefold and is codified in the 2004 Notice: • a sufficient degree of probability on the basis of a set of objective factors of law or facts which means that, although subjective intent on the part of undertakings to affect trade between the Member States is relevant evidence to be considered, it is not required (para 25); • an influence on the pattern of trade between the Member States; without being regarded as a ‘condition that trade be restricted or reduced’, the term ‘pattern of trade’ is used rather as a basis for an examination under EU competition law of agreement and practices that have cross-border effects (paras 33–35); and • a direct or indirect, actual or potential influence on the pattern of trade. While direct effects ‘normally occur in relation to the products covered by an agreement or practice’, indirect ones ‘often occur’ in relation to those products (paras 37 and 38 of the Notice and in the Zanussi SpA case (Commission Decision 78/922/EEC [1978] OJ L322/36, para 11)); equally, while actual effects on trade are produced by the implementation of an agreement or practice, potential effects ‘may occur in the future with a sufficient degree of probability’ (paras 40 and 41 of the Notice and Case 107/82 AEG-Telefunken v Commission [1983] ECR 3151, para 60 and Case T77/92 Parker Pen Ltd v Commission [1994] ECR II-549, paras 39–46). Indirect and potential effects do not imply speculative or hypothetical effects however (para 43 of the Notice and Case T-374/94 European Night Services Ltd (ENS) and others v Commission [1998] ECR II-3141, paras 102–103). Furthermore, the Court of Justice has developed a test based on whether or not the agreement or practice affects the competitive structure (Joined Cases T-24/93 and others, Compagnie maritime belge [1996] ECR II-1201, para 203). As noted in para 20 of the 2004 Notice: Agreements and practices that affect the competitive structure inside the [EU] by eliminating or threatening to eliminate a competitor operating within the [EU] may be subject to the [EU] competition rules. This is notably the case in the context of an undertaking in a dominant position as, for instance, in Istituto Chemioterapico Italiano SpA, in which the Court observed that … [w]hen an undertaking in a dominant position with the [single] market abuses its position in such a way that a competitor in the [single] market is likely to be eliminated, it does not matter whether the conduct relates to the latter’s exports or its trade within the [single] market, once it has been established that this elimination will have repercussions on the competitive structure within the [single] market. (para 33)

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16.4.3 Appreciability For Articles 101 and 102 TFEU to apply, trade within the EU must be affected in a significant or appreciable way. This was clearly established by the ECJ in Case 22/71 Béguelin Import Co v SAGL Import Export [1971] ECR 949 which stated that … in order to come within the prohibition imposed by article [101], the agreement must affect trade between member states and the free play of competition to an appreciable extent. (para 16) To measure appreciability, EU authorities can take into account the turnover of the undertakings concerned (absolute terms) and their respective position on the relevant market in light of their market shares (relative terms). Appreciability must therefore be assessed on the basis of ‘the circumstances of each individual case, in particular the nature of the agreement and practice, the nature of the products covered and the market position of the undertakings concerned’ (para 45 of the 2004 Notice). However, such measurements might not be necessary if it is possible to infer from the very nature of an agreement or concerted practice that it is liable to affect trade within the EU, ‘for example because they concern imports or exports or because they cover several Member States’ (para 48). In principle, some agreements will not appreciably affect trade between Member States when cumulative conditions are met. These are spelled out in para 52 of the 2004 Notice: • the aggregate market share of the parties on any relevant market within the EU does not exceed 5%; • the aggregate annual EU turnover of the undertakings party to horizontal agreements does not exceed €40 million; and • the aggregate annual EU turnover of the supplier in the products covered by vertical agreements does not exceed €40 million. The presumption that agreements and practices do not appreciably affect trade within the EU still applies ‘where during two successive calendar years the above turnover threshold is not exceeded by more than 10% and the above market threshold is not exceeded by more than 2 percentage points’ (para 52).

16.4.4 The applicability of the concept to agreements or abuses covering one, or part of a, single Member State Although, as mentioned above, the impact on cross-border economic activities must involve at least two Member States, it is irrelevant that the parties to the agreement or practice are from the same Member State, or an undertaking holds a dominant position in a part or the whole of a single Member State. In Case 8/72 Vereeniging van Cementhandelaren v Commission (Re Cement Cartel) [1972] ECR 977, the ECJ upheld the Commission’s finding that a price-fixing scheme limited to the Dutch cement market was capable of affecting trade between Member States and infringed former Article 85 TEEC (now Article 101 TFEU) on the ground that [a]n agreement extending over the whole of the territory of a member state by its very nature has the effect of reinforcing the compartmentalization of markets on a national basis, thereby holding up the economic interpenetration which the treaty is designed to bring about and protecting domestic production. (para 29)

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An autonomous EU law jurisdictional criterion which defines the scope of application of EU competition law (Case 56-58/64 Consten and Grundig v Commission)

Definition A direct or indirect, actual or potential influence on the pattern of trade (STM test) (Case 56/65 Société Technique Minière v Maschinenbau Ulm)

EFFECT ON TRADE BETWEEN THE MEMBER STATES

Purpose of the concept

EFFECT ON TRADE BETWEEN THE MEMBER STATES

EFFECT ON TRADE BETWEEN THE MEMBER STATES

This view was reiterated by the General Court in Joined Cases T-259/02 to T-264/02 and T-271/02 Raiffeisen Zentralbank Österreich AG and Others v Commission (Re The Lombard Club) [2006] ECR II-5169, para 180. However, such presumption can be rebutted by an analysis of the characteristics of the agreement and its economic context demonstrating the contrary (see Joined Cases C-215/96 and C-216/96 Bagnasco and Others [1999] ECR I-135, paras 51–53). In Joined Cases 43/82 and 63/82 VBVB & VBBB v Commission (Re Dutch Books) [1984] ECR 19, the Court held that there was no justification for the view that there could be no inter-State trade between the Flemish-speaking part of Belgium and Holland and that the geographical region to be taken into account was not the political territory of the two States but the Dutch-language territory thus forming a single entity. It therefore ruled that [t]hat line of argument on the part of the applicants [disregarded] the express wording of article [101], which refers to ‘trade between member states’. In this case the agreement indisputably [affected] trade between two member states, notwithstanding the linguistic links between them. This issue is also extensively covered in paras 77–99 of the 2004 Notice. Appreciability Trade between the Member States and free play of competition must be affected to an appreciable extent (Case 22/71 Béguelin Import Co v SAGL Import Export)

Figure 16.3 ‘Effect on trade between the Member States’

16.5 Further reading Baker JB, ‘Market Definition: An Analytical Overview’ (2007) 74 Antitrust Law Journal 129. Coate MB and Fischer JH, ‘Is Market Definition Still Needed After All These Years’ (2014) 2(2) Journal of Antitrust Enforcement 422–450. Coscelli A and Overd A, ‘Market Definition in the Pharmaceutical Sector’ (2007) 28(5) ECLR 294. Dunne N, ‘Knowing When to See it: State Activities, Economic Activities, and the Concept of Undertaking’ (2009–2010) 16 Columbia Journal of European Law 427. Nowag J, ‘SELEX Sistemi Integrati SpA v Commission of the European Communities (C-113/07 P) [2009] E.C.R. I-2207: Redefining the Boundaries between Undertaking and the Exercise of Public Authority’ (2010) 31(12) ECLR 483. Lasok KPE, ‘When is an Undertaking not an Undertaking’ (2004) 25(7) ECLR 383. Leupold B, ‘Effective Enforcement of EU Competition Law Gone Too Far? Recent Case Law on the Presumption of Parental Liability’ (2013) 34(11) ECLR 570.

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Šilhán J, ‘The Concept of Relevant Market: Some Critical Remarks’ (2012) 33(12) ECLR 589. Sinclair D, ‘“Undertakings” in Competition Law at the Public-Private Interface – an Unhealthy Situation’ (2014) 34(4) ECLR 167. Wenner F and Bertus Van Barlingen B, ‘European Court of Justice Confirms Commission’s Approach on Parental Liability’ (2010) 1 Competition Policy Newsletter 23. Wils WPJ, ‘The Undertaking as Subject of E.C. Competition Law and the Imputation of Infringements to Natural or Legal Persons’ (2000) 25 EL Rev 99. Summary

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From the very inception of the European economic integration process, competition rules have played a pivotal role which has evolved from an originally formalistic and legalistic approach to a more economic and consumer welfare-oriented one. Competition rules are also crucial to preserve the integrity of the internal market as a level playing field against interference with competition by undertakings’ behaviour that might affect trade between the Member States within a defined market. The key concepts that apply across competition rules on concerted behaviour, abuse of dominant position and mergers are those of: ‘undertakings’, ‘relevant market’ and ‘effect on trade between the Member States’. These concepts have been defined by the Commission and the Court in a rather broad manner for the benefit of ensuring a fair, competitive market within the EU. Test Your Knowledge

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‘One of the most important issues in competition (antitrust) law is determination of relevant market boundaries. Be it prohibited cartel agreements, regulation of dominant position, or merger control, the definition of relevant market is regularly an essential and usually also initial component of any case analysis in competition law.’ (Šilhán J, ‘The Concept of Relevant Market: Some Critical Remarks’ (2012) 33(12) ECLR 589) Discuss how this concept of ‘relevant market’ has been interpreted and applied by competition law authorities, notably the European Commission and the CJEU. Discuss the benefits of this concept and whether it is still needed in competition law. In light of the ruling in Case C-113/07P SELEX Sistemi Integrati SpA v Commission [2009] ECR I-2207, discuss how the concept of ‘undertaking’ has been defined in the case law of the CJEU. Analyse the application of the SNIPP test in Case T-340/03 France Télécom Sa v Commission [2007] ECR II-107.

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After reading this chapter, you will be able to understand: • • • • •

the control of horizontal and vertical restraints the individual and block exemptions from such control the concept of dominance the concept of abuse of dominance control of concentrations.

17.1 Introduction The Treaty provisions applicable to undertakings relate to two familiar types of anticompetitive behaviour on the market: anti-competitive agreements covered by Article 101 TFEU and abuse of dominant position prohibited under Article 102 TFEU. These two breaches of competition rules are fundamentally distinct and different. The former is the result of bilateral or collective collusion, whilst the latter is the expression of unilateral action by one or more undertakings taking advantage of their power on the market. While Article 101 prohibits the anti-competitive effects of collusion between several economic operators, Article 102 prohibits the restrictive effects of dominance on competition in the market within which an undertaking operates. Furthermore, while the prohibition of anti-competitive agreements laid down in Article 101(1) TFEU can be mitigated by the exemptions provided for under Article 101(3), the prohibition of abuse of dominance under Article 102 is absolute. Yet both provisions ‘seek to achieve the same aim on different levels, viz. the maintenance of effective competition within the [internal] market’ (Case 6/72 Europemballage Corporation and Continental Can Company Inc v Commission [1973] ECR 215). In this respect, even though this is not explicitly suggested in the Treaty, they can be seen as complementary. The application of one of the provisions is not necessarily exclusive of the other. Rather, as suggested in Case 66/86 Ahmed Saeed Flugreisen and others v Zentrale zur Bekämpfung unlauteren Wettbewerbs eV [1989] ECR 803, ‘the possibility that Articles [101] and [102] may both be applicable cannot be ruled out’ (para 37). In this case, the Court examined whether an undertaking in a dominant position could also be in breach of former Article 85 TEEC (now Article 101 TFEU). It is then possible to apply Articles 101 and 102 to situations where an undertaking in a dominant position is also party to an agreement as in Case 85/76 Hoffmann-La Roche & Co AG v Commission [1979] ECR 461 or where a collective dominance originates from an agreement (see Joined Cases T-68/89, T-77/89 and T78/89 Società Italiana Vetro SpA, Fabbrica Pisana SpA and PPG Vernante Pennitalia SpA v Commission (Re Italian Flat Glass) [1992] ECR II-1403). Depending on the particulars of the case, Articles 101 and 102 TFEU can also apply to concentrations (mergers of companies or acquisition of a company by another).

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However, even if concentrations are not seen as anti-competitive per se and are not prohibited as such under the Treaty provisions on competition, a special and complex ex ante or preventive regime of control of concentrations was deemed necessary and set up by way of secondary legislation.

17.2 Control of horizontal and vertical restraints under Article 101 TFEU Article 101 TFEU is the first fundamental provision of EU competition law. It is designed to protect a competitive economic environment within the European internal market from all forms of anti-competitive agreements or behaviour, whether horizontal or vertical, between businesses operating within that market. While its first and second paragraph lay down a strict prohibition leading to the voidance of any anti-competitive agreement or behaviour, its third paragraph recognises that, in certain limited circumstances, such anti-competitive behaviour may be exempted from the application of paragraph 1. Article 101(1) TFEU provides: The following shall be prohibited as incompatible with the internal market: all agreements between undertakings, decision 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 internal market …

17.2.1 The general economy of Article 101(1) TFEU The Commission Notice ‘Guidelines on the application of Article 81(3) of the Treaty’ ([2004] OJ C101/97) clearly explains the general economy and objective of the prohibition rule under Article 101(1). It notably states that [t]he objective of Article [101] is to protect competition on the market as a means of enhancing consumer welfare and of ensuring an efficient allocation of resources. Competition and market integration serve these ends since the creation and preservation of an open single market promotes an efficient allocation of resources throughout the [Union] for the benefit of consumers. (para 13) Prohibiting restrictive agreements and concerted practices between undertakings which affect trade between Member States, Article 101(1) is based on the general principle ‘that each economic operator must determine independently the policy, which he intends to adopt on the market’ (Joined Cases 40/73 to 48/73 and others, Suiker Unie v Commission (Re Sugar Cartel) [1975] ECR 1663, para 173; Case C-49/92 P Commission v Anic Partecipazioni SpA [1999] ECR I-4125, para 116; Joined Cases C89/85, C-104/85, C-114/85, C-116/85, C-117/85 and C-125/85 to C-129/85 A Ahlström Osakeyhtiö and others v Commission [1993] ECR I-1307, para 63).

17.2.2 The constituent elements of Article 101(1) TFEU The prohibition rule of Article 101(1) TFEU applies to: • agreements, concerted practices between undertakings and decisions by associations of undertakings; • whose object or effect is to prevent, restrict or distort competition within the internal market;

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in so far as they are capable of affecting trade between Member States (see 16.4).

The different forms of collusion Agreements, decisions and concerted practices have been defined by the EU Courts as autonomous EU law concepts whereby they clearly distinguished between coordination of behaviour or collusion between undertakings and unilateral conduct of an undertaking, the latter being subject only to Article 102 TFEU. In many ways it is not necessary to know the precise meaning of these concepts because of the wide meaning given to ‘concerted practice’ (see Concerted practice below). The term embraces both legally enforceable contracts and the constitution of trade associations. The focus of those practices is the collusion between undertakings, the purpose or effect of which is unlawful. The concept of collusion covers proper agreements combined with concerted practices and sometimes followed by or manifesting themselves in the form of decisions of associations of undertakings (eg, see Joined Cases T-5/00 and T-6/00 Nederlandse Federatieve Vereniging voor de Groothandel op Elektrotechnisch Gebied and Technische Unie BV v Commission EU:T:2003:342; Austrian banks — ‘Lombard Club’ Commission Decision COMP/36.571/D-1 (C(2002) 2091) and Joined Cases T-259/02 to T-264/02 and T-271/02 Raiffeisen Zentralbank Österreich AG and Others v Commission EU:T:2006:39; Industrial tubes Commission Decision C.38.240 (C(2003) 4820) and Case T-116/04 Wieland-Werke AG v Commission EU:T:2009:140). Quite common in cartels which consist of a set of successive or concomitant arrangements implemented in different countries over a sufficiently long period of time, the infringement is then regarded as a single, complex and continuous one as opposed to a series of multiple separate agreements. This concept covers a situation in which a number of undertakings participated in an infringement in which continuous conduct in pursuit of a single economic aim was designed to distort competition, and also individual infringements linked to one another by the same object (all the elements sharing the same purpose) and the same subjects (the same undertakings, which are aware that they are participating in the common object). (Case T-385/06 Aalberts Industries NV and Others v Commission EU:T:2011:114, para 86) (See also Case T-566/08 Total Raffinage Marketing v Commission EU:T:2013:423, paras 266–267 and Case T-446/05 Amann & Söhne GmbH & Co KG and Cousin Filterie SAS v Commission EU:T:2010:165, para 89.) Joint intention The parties’ joint intention or concurrence of wills to act in a specific way on the market is the minimum requirement for such conduct to be caught by Article 101(1) TFEU (see Case T-6/89 Enichem Anic SpA v Commission [1991] ECR II-1623, para 198; Case 41/69 ACF Chemiefarma NV v Commission (Re Quinine Cartel) [1970] ECR 661, para 112 and Joined Cases 209 to 215 and 218/78 van Landewyck Sàrl v Commission (FEDETAB) [1980] ECR 3125, para 86). In Enichem Anic SpA, the Court held that the Commission was entitled to treat as agreements the common intentions existing between the applicant and other polypropylene producers which related to price initiatives, sales volume targets for 1979 and 1980 and measures for restricting monthly sales for 1981 and 1982.

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Such intention of the parties need not be expressed in a valid and binding contract in national law (Case C-277/87 Sandoz prodotti farmaceutici SpA v Commission [1990] ECR I-45, para 13). Nor does it need to be explicit. For example, in Case T-35/92 P John Deere Ltd v Commission [1994] ECR II-957, para 66, the Court found that the provision of information collected upon registration of every vehicle presupposed a tacit agreement between traders in order to define the boundaries of the distributors’ sales territories, without which the information disseminated could not have been exploited in the same way. Similarly, the Court found joint intention in Case T-43/92 Dunlop Slazenger International Ltd v Commission [1994] ECR II-441, para 61, in which Dunlop provided, in unwritten terms, its exclusive distributors with absolute territorial protection and imposed on them an unwritten condition of sale prohibiting them from exporting its products to the territories of each of its distributors within the European market. By contrast, a gentleman’s agreement may be regarded as an agreement under Article 101 TFEU if its clauses amount to a ‘faithful expression of the joint intention of the parties to the agreement and restrict competition’ (see Quinine Cartel, paras 110– 113; Case 44/69 Buchler & Co v Commission [1970] ECR 733, paras 25–26 and Case T141/89 Tréfileurope Sales SARL v Commission (Re Welded Steel Mesh Sector) [1995] ECR II-791, para 96). The mere participation of an undertaking, even not actively, in meetings between undertakings with an anti-competitive intention, will make it a party to an agreement or practice. This will notably be the case if the undertaking does not publicly distance itself from what is discussed at those meetings and gives the ‘impression to the other participants that it subscribes to the outcome of the meetings and will act in conformity with it’ (see Case T-9/99 HFB Holding für Fernwärmetechnik Beteiligungsgesellschaft mbH & Co KG and Others v Commission [2002] ECR II-1487, para 223; Case T-61/99 Adriatica di Navigazione SpA v Commission [2003] ECR II5349, paras 91, 112, 118, 135–136; Case T-48/00 Corus UK Ltd (Re Seamless Steel) v Commission [2004] ECR II-2325, para 116 and Joined Cases T-67/00, T-68/00, T-71/00 and T-78/00 JFE Engineering v Commission (Re Seamless Steel Tubes and Pipes) [2004] ECR II-2501, para 327). Even participation in meetings with an anti-competitive object against its will or under alleged constraint from other undertakings with greater economic power is no defence as the undertaking ‘can always report the anti-competitive activities in question to the Commission rather than continue to participate in the meetings’ (see HFB Holding, para 226; Welded Steel Mesh Sector, para 58; Case T-308/94 Cascades SA v Commission [1998] ECR II-925, para 122 and Case T-17/99 KE KELIT v Commission (Re District Heating Pipes) [2002] ECR II-1647, para 50). As the Court put it in Case T-41/96 Bayer AG v Commission [2000] ECR II-3383, proof of an agreement between undertakings must be based on … the direct or indirect finding of the existence of the subjective element that characterises the very concept of an agreement, that is to say a concurrence of wills between economic operators on the implementation of a policy, the pursuit of an objective, or the adoption of a given line of conduct on the market, irrespective of the manner in which the parties’ intention to behave on the market in accordance with the terms of that agreement is expressed. (para 173) In this case, the Court found that the mere continuation of commercial relations with a manufacturer who adopted a new policy which it implemented unilaterally did not

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amount to concurrence of wills with its wholesalers whose de facto conduct was clearly contrary to that policy. It is also very clear from this case that, by definition, unilateral conducts escape the prohibition of Article 101(1) (see Case 107/82 AEG-Telefunken v Commission [1983] ECR 3151, para 38; Joined Cases 25/84 and 26/84 Ford - Werke AG and Ford of Europe Inc v Commission [1985] ECR 2725, para 21; Case T-43/92 Dunlop Slazenger International Ltd v Commission [1994] ECR II-441, para 56) and that this provision is concerned only with … conduct that is coordinated bilaterally or multilaterally, in the form of agreements between undertakings, decisions by associations of undertakings and concerted practices. (para 64) A clear distinction must therefore be drawn between an undertaking’s genuine unilateral measure without the express or implied participation of another undertaking and a measure whose unilateral character is merely apparent. As a result, as the Court put it, … the Commission cannot hold that apparently unilateral conduct on the part of a manufacturer, adopted in the context of the contractual relations which he maintains with his dealers, in reality forms the basis of an agreement … if it does not establish the existence of an acquiescence by the other partners, express or implied, in the attitude adopted by the manufacturer. (para 72) Article 101 TFEU may, however, be applicable to unilateral conducts in the context of long-term contracts with selected dealers such as in AEG-Telefunken v Commission, in which the Court found that the operation of a selective distribution system, where AEG, the manufacturer, refused to approve distributors who satisfied the qualitative criteria of the system in order to maintain a high level of prices or to exclude certain modern channels of distribution, was unlawful. The attitude of the manufacturer could not constitute unilateral conduct as, ‘in the case of the admission of a distributor, approval [was] based on the acceptance, tacit or express, by the contracting parties of the policy pursued by AEG’ (para 38). Equally, in Joined Cases 25 and 26/84 Ford - Werke AG and Ford of Europe Inc v Commission [1985] ECR 2725, para 21, a decision of the motor manufacturer not to supply right-hand drive cars to German dealers so as to prevent them from exporting those cars to the UK market was assimilated to an agreement (see also Case T-62/98 Volkswagen AG v Commission [2000] ECR II-2707, para 236, as confirmed on appeal in Case C-338/00 Volkswagen AG v Commission [2003] ECR I-9189, para 60). Article 101 is also applicable to agreements which produce their effects even after they have formally ceased to be in force (Case 51/75 EMI Records Ltd v CBS United Kingdom Ltd [1976] ECR 811, para 30). In this case, in which the proprietor of a trade mark in a Member State of the EU exercised his exclusive right to prevent the importation or marketing in that Member State of products bearing the same mark coming from a third country or manufactured in the EU by a subsidiary of the proprietor of the mark in that country, the ECJ ruled that [a]n agreement is only regarded as continuing to produce its effects if from the behaviour of the persons concerned there may be inferred the existence of elements of concerted practice and of coordination peculiar to the agreement and producing the same result as that envisaged by the agreement. (para 31)

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This principle was confirmed in later cases such as Case 243/83 SA Binon & Cie v Agence et Messagerie de la Presse SA [1985] ECR 2015, para 17 and Case T-10/89 Hoechst AG v Commission [1992] ECR II-629, para 288, the latter concerning the participation of polypropylene producers in agreements and concerted practices for the determination of their commercial and pricing policies. Decision by associations of undertakings Article 101(1) TFEU does not prohibit the creation of associations of undertakings but rather the common intention to make decisions having an anti-competitive object (Case C-235/92 P Montecatini SpA v Commission [1999] ECR I-4539). This phrase is therefore particularly relevant to the conduct of trade associations. In Case T-25/95 Cimenteries CBR and Others v Commission [2000] ECR II-491, the Court confirmed that it is not necessary for trade associations to have a commercial or economic activity of their own and Article 101(1) TFEU … applies to associations in so far as their activities or those of the undertakings belonging to them are calculated to produce the results which it aims to suppress. (para 1320) The concept of association of undertakings is broadly interpreted so as to include all forms of groupings of undertakings: commercial companies, non-profit associations, professional associations (Case C-309/99 JCJ Wouters, JW Savelbergh, Price Waterhouse Belastingadviseurs BV v Algemene Raad van de Nederlandse Orde van Advocaten [2002] ECR I-1577), economic interest groups, cooperative societies (Case T-61/89 Dansk Pelsdyravlerforening v Commission [1992] ECR II-1931), groupings without legal personality (Cement Commission Decision 94/815/EC ([1994] OJ L343/1)) or even a public law body (AROW/BNIC Commission Decision 82/896/EEC ([1982] OJ L379/1)). ‘Decision’ has to be understood as ‘faithful expression of the applicants’ intention to conduct themselves’ in the internal market (see van Landewyck Sàrl v Commission FEDETAB, para 86). The decision can take the form of a recommendation. According to Joined Cases 96-102, 104, 105, 108 and 110/82 NV IAZ International Belgium v Commission (IAZ) [1983] ECR 3369, it does not matter that the decision is not legally binding on the members of the association, as long as there is evidence that members complied with it so producing significant effects (IAZ, para 20 and FEDETAB, para 88). Here, an association of water supply undertakings recommended to its members not to connect certain dishwashers to the mains supply if they did not bear a conformity label issued by a Belgian manufacturers’ association; this was held contrary to former Article 85 TEEC (now Article 101 TFEU) because it discriminated against non-Belgian machines. Although a recommendation to members of an association, for instance to raise prices or boycott certain customers, could be challenged as a ‘concerted practice’ of its members, the word decision means that the trade association itself could be fined, and the making of the decision would be easier to prove than a concerted practice. Concerted practice The insertion of this phrase was intended to be an anti-avoidance device. However, its interpretation by the ECJ goes beyond the concept of a ‘gentleman’s agreement’ to encompass the intentional coordination of market behaviour. Two questions are raised here: what degree of coordination suffices and what sort of evidence is required?

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The notion of concerted practice The first question is answered in Case 48/69 Imperial Chemical Industries Ltd v Commission (Re Dyestuffs) [1972] ECR 619. In the Dyestuffs case, the ECJ upheld the Commission’s decision that there had been a concerted practice, as evidenced by the similarity of amount and timing of price increases, instructions issued by parents to subsidiaries and the fact that the various companies maintained informal contacts. The Court describes a concerted practice as

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… a form of coordination between undertakings which, without having reached the stage where an agreement properly so-called has been concluded, knowingly substitutes practical cooperation between them for the risks of competition. (para 64) The Court carries on, stating that [b]y its very nature, then, a concerted practice does not have all the elements of a contract but may inter alia arise out of coordination which becomes apparent from the behaviour of the participants. (para 65)

In the following Case 40/73 Suiker Unie v Commission (Re Sugar Cartel) [1975] ECR 1663, the Court dismissed the argument put forward by sugar producers accused of acting to protect the position of two Dutch producers that there had been no plan worked out beforehand. Such a plan was not necessary. What mattered was direct or indirect contact between operators, the object or effect of which was to influence the conduct of the market or to disclose to a competitor a course of conduct proposed to be adopted. From these two cases it can be seen that there must be practical cooperation between [undertakings] which leads to conditions of competition which do not correspond to the normal conditions of the market, having regard to the nature of the products, the importance and number of the undertakings as well as the size and nature of [their] market. (Suiker Unie, para 26) In other words, there must be a mental consensus to substitute cooperation for competition without it being achieved verbally as long as there is direct or indirect contact. Evidence of a concerted practice Proof of a concerted practice depends on circumstantial evidence. Much depends on the nature of the product, the size and nature of the undertakings and the volume of the market. In the Dyestuffs case, the correspondence of behaviour showed a high degree of coordination between the various producers: • price rises by similar amounts on three separate occasions; • identical rates of individual increases; • price rises applied to same dyestuffs; • price rises effected on almost the same day; • orders sent out on same day by producers had very similar wording; and • attendance by producers at meetings.

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However, although the ECJ stated in the Sugar Cartel case that the inference that there was a market sharing arrangement should not be too readily drawn as there might be other valid explanations as to why the market has been partitioned, in Case 107/82 AEG-Telefunken v Commission [1983] ECR 3151 the Court seemed prepared to accept the Commission’s inference that supplier and distributors had reached a mutual understanding in addition to their existing contractual relationship. A key issue here is whether coordinated behaviour enables the companies involved to foresee clearly and unequivocally the future conduct of their competitors.

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ca ple In the Wood Pulp Cartel case (Commission Decision 85/202/EEC ([1985] OJ L85/1)), the m exa Commission decided that 41 firms and two trade associations were parties to a concerted practice to fix the price of wood pulp although there was virtually no evidence of contact between the firms in question. As explained by the Court in Joined Cases C-89/85, C-104/85, C-114/85, C-116/85, C-117/85 and C-125/85 to C-129/85 A Ahlström Osakeyhtiö and others v Commission [1993] ECR I-1307, according to the Commission this was done through a system of quarterly price announcements ... which was deliberately introduced by the pulp producers in order to enable them to ascertain the prices that would be charged by their competitors in the following quarters. The disclosure of prices to third parties, especially to the press and agents working for several producers, well before their application at the beginning of a new quarter gave the other producers sufficient time to announce their own, corresponding, new prices before that quarter and to apply them from the commencement of that quarter. (para 60) For the Commission, … the implementation of that mechanism had the effect of making the market artificially transparent by enabling producers to obtain a rapid and accurate picture of the prices quoted by their competitors. (para 61) Thus, in the Commission’s view, the charging of parallel prices in a competitive market for heterogeneous goods where the producers were established in different countries facing different cost structures must have meant that there was a concerted practice. On appeal, the Court appeared to be more cautious and, after reiterating its definition of a concerted practice from the Suiker Unie case (para 63), came to the conclusion that [i]In this case, the communications arise from the price announcements made to users. They constitute in themselves market behaviour which does not lessen each undertaking's uncertainty as to the future attitude of its competitors. At the time when each undertaking engages in such behaviour, it cannot be sure of the future conduct of the others. Accordingly, the system of quarterly price announcements on the pulp market is not to be regarded as constituting in itself an infringement of Article [101(1)] of the Treaty. (paras 64–65, emphasis added)

Concerted practice and parallel behaviour It is necessary to distinguish a firm’s response to a competitor’s conduct from consensual coordination. Parallel behaviour may be unobjectionable if products are interchangeable and there is an open price structure even if there are few competitors (Dyestuffs case). The dividing line between mere parallel behaviour and a concerted practice is a hard one to spot especially in an oligopolistic market or industry. In such a market, the competition authorities are forced to rely on parallel conduct which, in the absence of evidence of contact, may simply be the natural result of having so few players on the

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market. In such case, economic theory suggests that similar behaviour (eg, price rises at the same time) by companies may just be the way an oligopolistic market operates. As the Court observes in A Ahlström Osakeyhtiö, as confirmed in Case T-30/91 Solvay SA v Commission [1995] ECR II-1775, para 75: In determining the probative value of those different factors, it must be noted that parallel conduct cannot be regarded as furnishing proof of concertation unless concertation constitutes the only plausible explanation for such conduct. It is necessary to bear in mind that, although Article [101] of the Treaty prohibits any form of collusion which distorts competition, it does not deprive economic operators of the right to adapt themselves intelligently to the existing and anticipated conduct of their competitors … (emphasis added) Accordingly, it is necessary in this case to ascertain whether the parallel conduct alleged by the Commission cannot, taking account of the nature of the products, the size and the number of the undertakings and the volume of the market in question, be explained otherwise than by concertation. (paras 71–72) What should companies do to avert suspicion? Although it might not always be easy for competition authorities to differentiate a concerted practice from parallel behaviour, undertakings should not feel overconfident and always seek to avert suspicion, as advised by the General Court.

in practice In Case T-1/89 Rhône-Poulenc SA v Commission (Re Polypropylene cartel) [1991] ECR II-867, para 103, the Court set out the following guidance to undertakings: • to have no contact, whether direct or indirect, with competitors; • if such contact is intended, not to influence the conduct of a competitor or disclose to such competitors one’s intended or possible conduct; • undertakings must work out their policies for themselves; • yet, they can adapt their policies intelligently to respond to the existing and anticipated conduct of their rivals.

Collusion Joint intention or concurrence of wills

Agreements

Valid and binding contracts Explicit and tacit agreements Gentlemen’s agreements Mere participation in meetings Tacit or express acceptance of unilateral policy

Figure 17.1 Collusion

Decisions by association of undertakings a ‘faithful expression of the applicants’ intention to conduct themselves in the internal market’ Recommendations

Concerted practices

A form of coordination which knowingly substitutes practical cooperation between undertakings for the risks of competition Different from parallel behaviour (notably in an oligopolistic market)

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17.2.2.2

Interference with competition Article 101(1) TFEU will apply only where the agreement, decision or practice has ‘as their object or effect to prevent, restrict or distort competition’. As the Court made it clear in Case 56/65 Société Technique Minière v Maschinenbau Ulm [1966] ECR 235: This interference with competition referred to in Article [101(1)] must result from all or some of the clauses of the agreement itself. Where, however, an analysis of the said clauses does not reveal the effect on competition to be sufficiently deleterious, the consequences of the agreement should then be considered and for it to be caught by the prohibition it is then necessary to find that those factors are present which show that competition has in fact been prevented or restricted or distorted to an appreciable extent. (at 249) The determination and assessment of any interference with competition (inter-brand, namely between suppliers of competing brands, and/or intra-brand, that is between distributors of the same brand) is necessarily the result of a complex analysis of several elements of the agreement or practice. The object or effect of the agreement or practice The STM case made it clear that the words ‘object or effect’ are not ‘cumulative but alternative requirements, indicated by the conjunction “or”’ (at 249) and have to be read disjunctively. Therefore, it is first necessary to consider the purpose of the agreement; if that is unclear, then it must be decided whether the agreement might have harmful effects on competition. As expressed in the Commission Guidelines on the application of Article 81(3) of the Treaty: The distinction between restrictions by object and restrictions by effect is important. Once it has been established that an agreement has as its object the restriction of competition, there is no need to take account of its concrete effects. In other words, for the purpose of applying Article [101(1)] no actual anticompetitive effects need to be demonstrated where the agreement has a restriction of competition as its object. (para 20) There are therefore two categories of agreements: those whose anti-competitive effect can be assumed and those whose anti-competitive effect has to be demonstrated by analysing their economic context. According to the Court in Case C-8/08 T-Mobile Netherlands BV, KPN Mobile NV, Orange Nederland NV and Vodafone Libertel NV v Raad van bestuur van de Nederlandse Mededingingsautoriteit [2009] ECR I-4529: The distinction between ‘infringements by object’ and ‘infringements by effect’ arises from the fact that certain forms of collusion between undertakings can be regarded, by their very nature, as being injurious to the proper functioning of normal competition. (para 29, emphasis added) More specifically, according to the Commission Guidelines on the application of Article 81(3) of the Treaty: Restrictions of competition by object are those that by their very nature have the potential of restricting competition. These are restrictions which in light of the objectives pursued by the [EU] competition rules have such a high potential of negative effects on competition that it is unnecessary for the purposes of applying Article [101(1)] to demonstrate any actual effects on the market. This presumption is based on the serious nature of the restriction and on experience

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showing that restrictions of competition by object are likely to produce negative effects on the market and to jeopardise the objectives pursued by the [EU] competition rules. Restrictions by object such as price fixing and market sharing reduce output and raise prices, leading to a misallocation of resources, because goods and services demanded by customers are not produced. They also lead to a reduction in consumer welfare, because consumers have to pay higher prices for the goods and services in question. (para 21) Guidance on restrictions of competition by object can also be found in the Commission block exemption regulations and guidelines (see 17.2.4.2). Restrictions that are black-listed and/or identified as hardcore restrictions are regarded as restrictions by object. These usually include price-fixing, export bans, output limitation, sharing of markets and customers, fixed and minimum resale price maintenance; restrictions providing absolute territorial protection, and restrictions on passive sales. In order to assess whether an agreement or practice contains restrictions by object, the facts surrounding it and the circumstances in which it operates will be examined: content of the agreement, aims, context of its application, conduct and behaviour of the parties on the market, actual implementation (see T-Mobile, paras 27–28). If the restriction by object is unclear, attention is then turned to the actual and potential restrictive effects of the agreement or practice. As explained in Case 23/67 SA Brasserie de Haecht v Wilkin [1967] ECR 525, it will be necessary to examine the particular product, measure competition in the rest of the relevant market (see 16.3) and analyse how other competitors behave. Article 101(1) TFEU provides a non-exhaustive list of agreements which have as their object the restriction of competition. These are agreements which: (a) directly or indirectly fix purchase or selling prices or any other trading conditions (eg Dyestuffs: a concerted practice leading to parallel pricing over a number of years; Case 8/72 Vereeniging van Cementhandelaren v Commission (Re Cement Cartel) [1972] ECR 977: recommended prices issued by a trade association to its members; Joined Cases 43/82 and 63/82 VBVB & VBBB v Commission (Re Dutch Books) [1984] ECR 19: agreement relating to resale price maintenance; Vitamins Cartel Commission Decision 2003/2/EC ([2003] OJ L6/1) and Joined Cases T-22/ 02 and T-23/02 Sumitomo Chemical Co Ltd and Sumika Fine Chemicals Co Ltd v Commission [2005] ECR II-4065: price-fixing on the market of vitamin products; Case T-588/08 Dole Food Company, Inc and Dole Germany OHG v Commission EU:T:2013:130: coordination of quotation prices for bananas marketed in Northern Europe; Cases T-82/13 Panasonic Corp and MT Picture Display Co Ltd v Commission EU:T:2015:612, T-84/13 Samsung SDI Co Ltd and Others v Commission EU:T:2015:611, T-91/13 LG Electronics, Inc v Commission EU:T:2015:609, T-92/13 Koninklijke Philips Electronics NV v Commission EU:T:2015:605 and T-104/13 Toshiba Corp v Commission EU:T:2015:610: pricefixing on global market for cathode ray tubes for television sets and computer monitors; Case T-180/15 Icap plc and Others v Commission EU:T:2017:795: manipulation of the JPY LIBOR and Euroyen TIBOR interbank reference rates; Commission Decision in Case AT.39563 – Retail Food Packaging (C(2015) 4336 final): price-fixing on market of foam polystyrene plastic trays and PP rigid polypropylene plastic trays);

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(b) limit or control production, markets, technical development, or investment (eg Quinine Cartel; Zinc Producer Group Commission Decision 84/405/EEC ([1984] OJ L220/27): quotas and restrictions on production; Panasonic Corp, Samsung SDI Co Ltd, LG Electronics, Inc., Koninklijke Philips Electronics NV and Toshiba Corp: output limitations); (c) share markets or sources of supply (eg Joined Cases 56 and 58/64 Établissements Consten SàRL and Grundig-Verkaufs-GmbH v Commission [1966] ECR 299; Quinine Cartel; Peroxygen products Commission Decision 85/74/EEC ([1985] OJ L35/1); Methylglucamine Commission Decision 2004/104/EC ([2004] OJ L38/18): market sharing; Panasonic Corp, Samsung SDI Co Ltd, LG Electronics, Inc, Koninklijke Philips Electronics NV and Toshiba Corp: market and customer sharing; Power cables Commission Decision C(2014) 2139 final ([2014] OJ C319/ 6) and Case T-419/14 The Goldman Sachs Group, Inc v European Commission EU:T:2018:445: restriction of competition for underground and submarine power cable projects in specific territories by agreeing on market and customer allocation; Commission Decision in Case AT.39563 – Retail Food Packaging (C(2015) 4336 final): allocation of clients on market of foam polystyrene plastic trays and PP rigid polypropylene plastic trays); (d) apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage (eg IAZ: recommendation by an association of water supply undertakings not to connect certain dishwashers to the mains supply if they did not bear a conformity label; Case 26/76 Metro SBGrossmärkte GmbH & Co KG v Commission (Metro I) [1977] ECR 1875: appointment of several distributors selected on the basis of different criteria – compatible with Article 101 TFEU if the criteria are qualitative, see below ‘Case Example’ at 17.2.5.1; Case 230/16 Coty Germany GmbH v Parfümerie Akzente GmbH EU:C:2017:941: a supplier of luxury goods prohibiting its authorised distributors from selling those goods on a third-party internet platform such as Amazon to preserve the luxury image of the goods); (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. The optical disk drives cartel

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The Commission’s decision Dell and Hewlett Packard (HP) are the two most important original equipment manufacturers on the global market for PCs. Optical disk drives (ODDs) are used in their PCs. For the selection of their ODD suppliers, Dell and HP used standard procurement procedures carried out on a global basis. These procedures involved quarterly negotiations over a worldwide price and overall purchase volumes with a small number of pre-qualified suppliers, requests for quotations, and included electronic requests for quotations, internet negotiations, e-auctions and bilateral (offline) negotiations. HP and Dell used those procedures to achieve efficient procurement at competitive prices. All possible practices were used to stimulate the price competition between the ODD suppliers (recital 33). Philips, Lite-On, Philips-Lite-On, Hitachi-LG, Sony, Sony Optiarc and Quanta are the main worldwide players active on the market for ODDs and are top ODD suppliers for Dell and HP.

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In its decision of 21 October 2015 (Case AT.39639 – Optical Disk Drives, C(2015) 7135 final), the Commission found that the cartel participants had coordinated their competitive behaviour, between June 2004 and November 2008, through a network of parallel bilateral contacts in order to accommodate their volumes on the market and ensure that the prices remained at levels higher than they would have been in the absence of those bilateral contacts (recital 67). The cartel network was used to manipulate HP’s and Dell’s procurement procedures in order to obstruct the latter’s attempts to stimulate price competition. The cartelists consistently exchanged pricing information regarding specific customer accounts as well as information on, among other things, existing production and supply capacity, inventory status, the qualification status, timing of the introduction of new products or upgrades. They also monitored the final results of closed procurement events regarding the rank, the price and the volume obtained. This enabled them to acquire a very complex knowledge about their competitors’ intentions at the point of entering the procurement event and thus to foresee their competitive strategy (recitals 67–72). The anti-competitive practice was reported to the Commission by Philips, Lite-On and Philips & Lite-On Digital Solutions Corporation which were, as a result, granted immunity from fines. Fines were, however, imposed on the other participating companies, ie Sony Corporation and Sony Electronics Inc, Sony Optiarc Inc and Sony Optiarc America Inc, Quanta Storage Inc, Hitachi-LG Data Storage Inc, Hitachi-LG Data Storage Korea Inc and Toshiba Samsung Storage Technology Corp and Toshiba Samsung Storage Technology Korea Corp. Those companies brought actions before the General Court for annulment of the Commission’s Decision or a reduction of the fines. The judgment of the General Court The General Court upheld the Commission’s decision, finding that there was a cartel and confirmed the fines imposed (Cases T-762/15 Sony Corporation and Sony Electronics Inc EU:T:2019:515, T-763/15 Sony Optiarc Inc and Sony Optiarc America Inc EU:T:2019:517, T-772/15 Quanta Storage Inc EU:T:2019:519, T-1/16 Hitachi-LG Data Storage Inc and Hitachi-LG Data Storage Korea Inc EU:T:2019:514 and T-8/16 Toshiba Samsung Storage Technology Corp and Toshiba Samsung Storage Technology Korea Corp EU:T:2019:522 v Commission). Following a detailed analysis of a series of contacts between the cartel participants in relation to the sales that they made to Dell and HP, the Court observed that most of those contacts revealed that those practices were, by their object, capable of distorting competition on the relevant market (paras 68–191). It also agreed with the Commission that the anti-competitive practices concerned constituted a single and continuous infringement (see above 17.2.2.1) and consisted of a series of instances of individual anticompetitive conduct. (paras 197–222)

The prevention, restriction or distortion of competition In Consten and Grundig the Court ruled that … what is particularly important is whether the agreement is capable of constituting a threat, either direct or indirect, actual or potential, to freedom of trade between Member States in a manner which might harm the attainment of the objectives of a single market between States. Thus the fact that an agreement encourages an increase, even a large one, in the volume of trade between States is not sufficient to exclude the possibility that the agreement may ‘affect’ such trade … (at 341) What matters is therefore that the pattern of trade has changed. The key word is therefore ‘distortion’, namely an unlawful manipulation of the market. Actual or potential competition must be restricted ‘to such an extent that on the relevant market negative effects on prices, output, innovation or the variety or quality of goods and services can be expected with a reasonable degree of probability’

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(Guidelines, para 24). However, those negative effects must be appreciable. Should they be insignificant, the prohibition rule of Article 101(1) does not apply. In line with the economic approach of the Commission, the appreciability of those anticompetitive effects has to be based on a proper analysis of the relevant market. The ‘appreciable effect’ concept, which appears to be a gloss added by the Court to Article 101(1), was first formulated in Case 5/69 Franz Völk v SPRL Ets J Vervaecke [1969] ECR 295 and confirmed in further cases such as Case C-238/05 Asnef-Equifax, Servicios de Información sobre Solvencia y Crédito, SL v Asociación de Usuarios de Servicios Bancarios (Ausbanc) [2006] ECR I-11125, para 50. In the latter case, the Court stated that … it should be emphasised that the appraisal of the effects of agreements or practices in the light of Article [101 TFEU] entails the need to take into consideration the actual context to which they belong, in particular the economic and legal context in which the undertakings concerned operate, the nature of the goods or services affected, as well as the real conditions of the functioning and the structure of the market or markets in question … … while Article [101(1) TFEU] does not restrict such an assessment to actual effects alone, as that assessment must also take account of the potential effects of the agreement or practice in question on competition within the [internal] market, an agreement will, however, fall outside the prohibition in Article [101] if it has only an insignificant effect on the market … (paras 49–50) If the aggregate market share involved is minute (eg 0.5% as in the Völk case) then the restrictive effect of the agreement will be deemed insignificant and the infringement of Article 101 will be ignored. This gave rise to the de minimis doctrine, which was codified for the first time in the 1970 Commission Notice on agreements of minor importance which do not appreciably restrict competition under Article 85(1) of the Treaty Establishing the European Economic Community (De Minimis Notice). The third version of 1986 laid down two criteria: • the relevant products could not represent more than 5% of the total market for such products; and • the participating undertakings could not have an aggregate turnover in excess of 300 million Ecus. This threshold approach based on market share and aggregate turnover was abandoned in the 1997 version of the Notice. The Commission focused then on market shares alone. Paragraph 9 provided that agreements concerning goods and services would not fall within former Article 85 (now Article 101 TFEU) if the market share of the participating undertakings on the relevant markets did not exceed 5% in the case of horizontal or mixed horizontal/vertical agreements and 10% in the case of vertical agreements. Those criteria were again modified under the 2001 De Minimis Notice and in its latest version of 2014 (Notice on agreements of minor importance which do not appreciably restrict competition under Article 101(1) of the Treaty on the Functioning of the European Union (De Minimis Notice) ([2014] OJ C291/1)). Under paragraphs 8, 9 and 11 of the 2014 Notice, the focus is no longer on the horizontal/vertical agreement divide but on that between agreements involving competitors and those between non-competitors:

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The Commission holds the view that agreements between undertakings which may affect trade between Member States and which may have as their effect the prevention, restriction or distortion of competition within the internal market, do not appreciably restrict competition within the meaning of Article 101(1) of the Treaty: (a) if the aggregate market share held by the parties to the agreement does not exceed 10 % on any of the relevant markets affected by the agreement, where the agreement is made between undertakings which are actual or potential competitors on any of those markets (agreements between competitors); or (b) if the market share held by each of the parties to the agreement does not exceed 15 % on any of the relevant markets affected by the agreement, where the agreement is made between undertakings which are not actual or potential competitors on any of those markets (agreements between noncompetitors). (para 8) In cases where it is difficult to classify the agreement as either an agreement between competitors or an agreement between non-competitors the 10 % threshold is applicable. (para 9) … The Commission also holds the view that agreements do not appreciably restrict competition if the market shares of the parties to the agreement do not exceed the thresholds of respectively 10 %, 15 % and 5 % set out in points 8, 9 and 10 during two successive calendar years by more than 2 percentage points. (para 11) Having said that, it should be noted that the economic impact of an agreement should be assessed in a wider context as an apparently minor agreement may fall foul of Article 101 if it is part of a network of similar agreements (see Brasserie de Haecht, at 415 and Case C-234/89 Delimitis v Henninger Bräu [1991] ECR I-935, para 14), as clearly expressed in paragraph 10 of the De Minimis Notice: Where, in a relevant market, competition is restricted by the cumulative effect of agreements for the sale of goods or services entered into by different suppliers or distributors (cumulative foreclosure effect of parallel networks of agreements having similar effects on the market), the market share thresholds set out in point 8 and 9 are reduced to 5 %, both for agreements between competitors and for agreements between non-competitors. Individual suppliers or distributors with a market share not exceeding 5 %, are in general not considered to contribute significantly to a cumulative foreclosure effect. A cumulative foreclosure effect is unlikely to exist if less than 30 % of the relevant market is covered by parallel (networks of) agreements having similar effects. The market shares are calculated ‘on the basis of sales value data or, where appropriate, purchase value data’ (para 12) within the relevant product and geographic market as defined by reference to the Notice on the definition of relevant market (see 16.3). The De Minimis Notice therefore creates a ‘safe harbour’ for: (a) categories of agreements not covered by a Commission block exemption regulation (see below 17.2.4.2), such as, for instance, trade mark licence agreements and most categories of agreements between competitors; and (b) agreements covered by a block exemption regulation containing an excluded restriction which, although not a hardcore restriction, does not benefit from the exemption of the application of Article 101(1) under the regulation (such as those

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in Article 5 of Commission Regulation 330/2010 on the application of Article 101(3) TFEU to categories of vertical agreements and concerted practices; Article 6 of Commission Regulation 1217/2010 on the application of Article 101(3) TFEU to certain categories of research and development agreements; and Article 5 of Commission Regulation 316/2014 on the application of Article 101(3) TFEU to categories of technology transfer agreements). This Notice does not apply, however, to agreements which have as their object the prevention, restriction or distortion of competition within the internal market, such as: • the fixing of prices when selling products to third parties; • the limitation of output or sales; or • the allocation of markets or customers. Nor will the Notice cover agreements containing any of the restrictions that are listed as hardcore restrictions in one of the block exemption regulations. According to paragraph 7, the De Minimis Notice is without prejudice to the interpretation of Article 101 TFEU by the Courts. For instance, in Case 30/78 Distillers Company Limited v Commission [1980] ECR 2229, the ECJ seemed to have felt that the quantitative approach in the 1977 Notice was inappropriate, holding that an agreement relating to the terms of supply for ‘Pimms’ was caught by former Article 85 TEEC (now Article 101 TFEU); sales of the drink outside the UK were minimal compared with other spirits but this was outweighed by the size of the applicants in relation to the drinks market as a whole. The non-binding nature of the De Minimis Notice was confirmed by the Court in Case C-226/11 Expedia Inc v Autorité de la concurrence and others EU:C:2012:795, in which it stated that … in order to determine whether or not a restriction of competition is appreciable, the competition authority of a Member State may take into account the thresholds established in paragraph 7 of the de minimis notice but is not required to do so. Such thresholds are no more than factors among others that may enable that authority to determine whether or not a restriction is appreciable by reference to the actual circumstances of the agreement. (para 31) Interference with competition Object or effect to prevent, restrict or distort competition

Object or effect Alternative requirements agreements whose anti-competitive effect is assumed (Art 101(1) list) agreements whose anti-competitive effect must be proven

Prevention, restriction or distortion of competition The agreement is capable of threatening directly or indirectly, actually or potentially, freedom of trade Negative effects must be appreciable (de minimis doctrine)

Figure 17.2 Object or effect on competition

17.2.3 Article 101(1) TFEU applies to horizontal and vertical agreements alike At one time it was thought that former Article 85 TEEC (now Article 101 TFEU) only applied to horizontal agreements between competitors operating at the same level of

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the market (eg between manufacturers or between distributors) rather than vertical constraints between parties operating at a different level of the market (eg between manufacturers and distributors). The ECJ dismissed this assumption in Consten and Grundig. Here there had been the appointment of an exclusive distributor in France which precluded other distributors competing with it for the sale of Grundig’s products. This was caught by former Article 85 TEEC, it being irrelevant that the parties concerned operated at different levels in the market and that the agreement restricted intra-brand competition (the way Grundig’s goods were dealt with) rather than inter-brand competition (preventing retailers selling rivals’ products). In this case, the Court ruled that Article [101] refers in a general way to all agreements which distort competition within the [internal] market and does not lay down any distinction between those agreements based on whether they are made between competitors operating at the same level in the economic process or between non-competing persons operating at different levels. In principle, no distinction can be made where the treaty does not make any distinction. (at 339) 17.2.3.1

Horizontal agreements Apart from the obvious horizontal anti-competitive agreements in the form of cartels which are entered into to limit competition, there exist a number of horizontal ‘cooperation agreements’ which are entered into for pro-competitive reasons which may outweigh their anti-competitive effects. The Commission in its Guidelines on the applicability of Article 101 of the Treaty on the Functioning of the European Union to horizontal co-operation agreements ([2011] OJ C11/01) recognises fully the dual nature of horizontal cooperation agreements which on the one hand … can lead to substantial economic benefits, in particular if they combine complementary activities, skills or assets [and] can be a means to share risk, save costs, increase investments, pool know-how, enhance product quality and variety, and launch innovation faster, while on the other hand … may lead to competition problems … for example … if the parties agree to fix prices or output or to share markets, or if the co-operation enables the parties to maintain, gain or increase market power and thereby is likely to give rise to negative market effects with respect to prices, output, product quality, product variety or innovation. (paras 2–3) These Guidelines provide an analytical framework based on legal and economic criteria for most categories of horizontal cooperation agreements, namely: • research and development agreements which may concern the acquisition of know-how, theoretical analyses, studies and experiments relating to products or process, and may be structured in various ways including a joint venture; • production agreements including subcontracting (whereby a contractor entrusts production of a product to a subcontractor), unilateral specialisation (whereby one firm gives up the manufacture of certain products or provision of services in favour of another party), reciprocal specialisation (whereby each participant gives up the manufacture of certain products or provision of certain services in favour of

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• • •

• 17.2.3.2

another party) and joint production (the participants jointly manufacture certain products or provide services); purchasing agreements, often concluded by small and medium-sized companies, concerning the joint buying of products; commercialisation agreements which involve cooperation between competitors in the selling, distribution or promotion of their products; standardisation agreements, including standard contracts and information exchange, aiming at defining technical or quality requirements with which current or future products, processes or methods may comply; and environmental agreements whereby the parties undertake to achieve pollution abatement or environmental objectives.

Vertical agreements The Commission Guidelines on Vertical Restraints ([2010] OJ C130/01) define a vertical agreement as an … agreement or concerted practice entered into between two or more undertakings each of which operates, for the purposes of the agreement or the concerted practice, at a different level of the production or distribution chain, and relating to the conditions under which the parties may purchase, sell or resell certain goods or services. (para 24) A producer of goods or services faces the choice of vertical integration (by arranging its own distribution through its own organisation or via a subsidiary company) or by appointing an agent. The Commission has tended to adopt a benevolent attitude here because there may be beneficial effects on both sides. As stated in paragraph 6: For most vertical restraints, competition concerns can only arise if there is insufficient competition at one or more levels of trade, that is, if there is some degree of market power at the level of the supplier or the buyer or at both levels. Vertical restraints are generally less harmful than horizontal restraints and may provide substantial scope for efficiencies. Examples of vertical agreements include: • exclusive distribution whereby a supplier agrees to sell its products to only one distributor for resale in particular territory; • exclusive customer allocation whereby a supplier agrees to sell its products to only one distributor for resale to particular class of customer; • selective distribution whereby a supplier agrees to sell its products to selected (or authorised) distributors; • franchising, under which a franchiser licenses the franchisee to use intellectual property rights (trade marks, signs, know-how) for the use and distribution of goods and services and also provides the franchisee with commercial and technical assistance; • exclusive supply: for a particular final product, only one buyer inside the EU to which the supplier may sell it; and for intermediate goods or services, only one buyer in the EU or only one buyer in the EU for the purpose of a specific use (also known as industrial supply); • single branding whereby the buyer has an obligation or incentive to purchase practically all its requirements on a particular market from one supplier only;

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•

tying whereby the supplier makes the sale of one product (tying product) conditional upon the purchase of another distinct product (tied product) from the supplier or someone designated by the supplier; • recommended and maximum resale prices whereby the supplier recommends a resale price to the reseller or requires the reseller to respect a maximum resale price. Some agreements, such as technology transfer agreements (TTAs), are regarded as mixed agreements as they combine horizontal and vertical aspects. Categories of agreements Horizontal agreements (made between competitors operating at the same level of the economic process) research and development agreements production agreements purchasing agreements commercialisation agreements standardisation agreements environmental agreements

Vertical agreements (made between competitors operating at different levels of the economic process) exclusive distribution selective distribution franchising exclusive supply single branding tying

Mixed agreements (combined horizontal and vertical dimensions) technology transfer agreements

Figure 17.3 Categories of agreements

17.2.4 The nullity of a restrictive agreement under Article 101(2) TFEU Article 101(2) TFEU provides that: All agreements or decisions prohibited pursuant to this Article shall be automatically void. The effect of this paragraph was stressed by the ECJ notably in Case C-453/99 Courage Ltd v Crehan and Crehan v Courage Ltd and Others [2001] ECR I-6297: … according to Article 3(g) of the EC Treaty … Article [101] of the Treaty constitutes a fundamental provision which is essential for the accomplishment of the tasks entrusted to the [EU] and, in particular, for the functioning of the internal market … Indeed, the importance of such a provision led the framers of the Treaty to provide expressly, in Article [101(2)] of the Treaty, that any agreements or decisions prohibited pursuant to that article are to be automatically void … That principle of automatic nullity can be relied on by anyone, and the courts are bound by it once the conditions for the application of Article [101(1)] are met and so long as the agreement concerned does not justify the grant of an exemption under Article [101(3)] of the Treaty … Since the nullity referred to in Article [101(2)] is absolute, an agreement which is null and void by virtue of this provision has no effect as between the contracting parties and cannot be set up against third parties …. Moreover, it is capable of having a bearing on all the

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effects, either past or future, of the agreement or decision concerned … (paras 20– 22) However, as the Court stated in the STM case: … automatic nullity in question only applies to those parts of the agreement affected by the prohibition, or to the agreement as a whole if it appears that those parts are not severable from the agreement itself. (at 250) The consequences of such nullity for the remaining part of the agreement are not to be determined under EU law but by national courts according to their own law (Case 319/82 Société de Vente de Ciments et Bétons de l’Est SA v Kerpen & Kerpen GmbH und Co KG [1983] ECR 4173, paras 11–12). The wording of Article 101(2) leaves it open for other sanctions for infringements of Article 101(1) to be used. Indeed, European and national authorities and courts have developed other sanctioning mechanisms. In effect, the parties to a prohibited agreement might be liable to pay damages to any injured third party. Also, Regulation 1/2003 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty ([2003] OJ L1/1) (see 18.3) gives the European Commission and national competition authorities the power to impose fines and periodic penalty payments. National competition authorities can also impose any other penalty provided for in their national law (see 18.3).

17.2.5 Exemptions under Article 101(3) TFEU The prohibition rule of Article 101(1) TFEU is not absolute and is inapplicable to agreements which satisfy the conditions provided for in Article 101(3) TFEU. Even if they affect competition, agreements are a constituent part of the market and may have beneficial effects. For instance, agreements whose purpose is to promote technical and technological progress might contribute to economic and social progress. Far from prohibiting such agreements – which could prove counter-productive – EU competition law endeavours rather to promote them. As the Commission Guidelines on the application of Article 81(3) of the Treaty state: The assessment of restrictions by object and effect under Article [101(1)] is only one side of the analysis. The other side, which is reflected in Article [101(3)], is the assessment of the positive economic effects of restrictive agreements. (para 32) While competition rules aim to protect competition on the market as a way of ‘enhancing consumer welfare and of ensuring an efficient allocation of resources’, agreements which restrict competition may equally have pro-competitive effects by way of efficiency gains. Agreements whose pro-competitive effects outweigh its anticompetitive effects will then be deemed to be ‘on balance pro-competitive and compatible with the objectives of the [EU] competition rules’ (Guidelines, para 33). For this reason, Article 101(3) TFEU ‘sets out an exception rule, which provides a defence to undertakings against a finding of an infringement of Article [101(1)] of the Treaty’ (Guidelines, para 1) in the form of individual and collective exemptions. Article 101(3) TFEU provides that: 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,

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– 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. Until the coming into force on 1 May 2004 of Regulation 1/2003, Regulation 17/62 granted exclusive powers to the Commission to grant exemptions under former Articles 85(3) TEEC and 81(3) TEC (now Article 101(3) TFEU). While this centralised enforcement of European competition law made sense and was necessary in the early stages of the European integration when economic markets were still defined along national borders, it became increasingly cumbersome. In the wake of the 2004 enlargement to Eastern and Central European countries, Regulation 1/2003 decentralised the exemption procedure and transferred those powers to national competition authorities and courts (see 18.2). 17.2.5.1

The general economy of Article 101(3) TFEU By definition, Article 101(3) TFEU applies only to an agreement between undertakings that distorts competition and is caught under Article 101(1). There is therefore no need to examine any benefits generated by non-restrictive agreements. Article 101(3) can be invoked as a defence where the restrictive agreement satisfies four cumulative requirements (see Case T-185/00 Métropole télévision SA (M6) v Commission [2002] ECR II-3805, para 86 and Case T-17/93 Matra Hachette SA v Commission [1994] ECR II-595, para 104). This means that all conditions must be fulfilled for the exemption to be granted. Failing that, the application of the exception rule is refused and the agreement will be deemed to be null and void under Article 101(2) TFEU (see Case T-213/00 CMA CGM and others v Commission [2003] ECR II913, para 226; see also above at 17.2.3). Furthermore, those requirements are exhaustive (see Case 26/76 Metro I [1977] ECR 1875, para 43 and Matra, para 139). While, in principle, all anti-competitive agreements and practices fulfilling Article 101(3) conditions are covered by the exception rule (see Matra, para 85), agreements containing hardcore or black-listed restrictions are very unlikely to be as they would generally fail to satisfy the first two conditions (objective benefits and a fair share for consumers) (Case T-29/92 Vereniging van Samenwerkende Prijsregelende Organisaties in de Bouwnijverheid and others v Commission [1995] ECR II-289, para 256) and the third one (no indispensable restrictions, known as the indispensability test) (Case 258/ 78 LC Nungesser KG and Eisele v Commission [1982] ECR 2015, para 77). The first two requirements are positive conditions (objective benefits and a fair share for consumers) and the last two negative ones (no indispensable restrictions and no substantial elimination of competition). Objective benefits In the words of the Article, the restrictive agreement must ‘contribute to improving the production or distribution of goods’ or it must ‘promote technical or economic progress’. Although express reference is made to goods only, services are also covered by Article 101(3).

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According to the settled case law, only objective benefits or efficiency gains can be taken in consideration. As the Court stated in Consten and Grundig, … improvement must in particular show appreciable objective advantages of such a character as to compensate for the disadvantages which they cause in the field of competition. (at 348, emphasis added) As Article 101(3) applies only where the pro-competitive effects of an agreement outweigh its anti-competitive ones, an analysis has to be made to determine what the objective benefits of the agreements are and the economic value of those claimed efficiencies. A direct causal link between the agreement and the claimed benefits must therefore be established. As explained in the Commission Guidelines on the application of Article 81(3): All efficiency claims must therefore be substantiated so that the following can be verified: (a) The nature of the claimed efficiencies; (b) The link between the agreement and the efficiencies; (c) The likelihood and magnitude of each claimed efficiency; and (d) How and when each claimed efficiency would be achieved. (para 51) The case law also shows that there can be a considerable overlap between these benefits as the categories of efficiencies covered in Article 101(3) are very broadly defined. Objective benefits, such as cost and quality efficiencies, usually result from an integration of economic activities and assets, enabling parties to an agreement to achieve certain objectives more efficiently together that they would separately. Examples include specialisation agreements, research and development agreements, and exclusive or selective dealership agreements. Fair share for consumers The second condition of Article 101(3) provides that consumers must receive ‘a fair share of the resulting benefit’ generated by the agreement. The ‘consumers’ to be benefited need not be members of the public, but can be direct or indirect customers of one of the parties, namely manufacturers of other products, wholesalers, retailers and final consumers. ‘Fair share’ must be understood as the pass-on of benefits to consumers, compensating the latter for the negative effects of the restriction of competition they would suffer. Either the negative effects on the consumers are outweighed or at least neutralised by the positive effects of the agreement and the agreement then fulfils the second condition, or they are not and the agreement does not satisfy the condition. It is not expected that consumers receive a share of every single claimed improvement but sufficient benefits outweighing and compensating the negative impact of the agreement, as demonstrated in the Metro I case.

Substantive Competition Rules Applicable to Undertakings

In Metro I, Metro challenged the Commission’s decision to grant negative clearance to SABA’s selective distribution system for its TVs, SABA having refused to supply Metro because it did not meet the stipulated conditions. The ECJ upheld the idea of selective distribution agreements, but stated that: •

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the goods must be of a type where it is legitimate to restrict the number and type of retail outlets. Hence watches, jewellery, perfume, cars, consumer durables and personal computers are all suitable goods for selective distribution, but plumbing fittings are not; the outlets must be chosen on the basis of objective, qualitative criteria, eg that the distributor has a specialised department dealing in the goods; employs trained staff; offers after-sales service; displays the goods in an attractive manner; deals in a wide and varied range of the contract goods; has a favourable credit rating. However, dealers must not be selected on the basis of quantitative criteria; the restrictions must be no more than is necessary to protect the quality of the goods (proportionality); there must be no refusal to supply a qualified retailer because this may be a disguised attempt to maintain prices or divide the market. With regard to the fair share of benefits for consumers, the Court pointed out that … regular supplies represent a sufficient advantage to consumers for them to be considered to constitute a fair share of the benefit resulting from the improvement brought about by the restriction on competition permitted by the Commission. (para 48)

(See also AEG-Telefunken v Commission and Case C-439/09 Pierre Fabre Dermo-Cosmétique EU:C:2011:649.) For a recent application of Metro I to a selective repair system on an aftermarket, see Case T-712/14 Confédération européenne des associations d'horlogers-réparateurs (CEAHR) v Commission EU:T:2017:748. In this case, the European confederation of watch repairers’ associations (CEAHR), a non-profit-making association consisting of nine national associations from eight Member States representing the interests of independent watch repairers, lodged a complaint with the European Commission against Swiss watch manufacturers (such as The Swatch Group SA, Richemont International SA, LVMH Moët Hennessy-Louis Vuitton SA, Rolex SA, etc), alleging the existence of an agreement or a concerted practice between them and an abuse of a dominant position resulting from the refusal of those manufacturers to continue to supply spare parts to independent watch repairers. The Swiss watch manufacturers had set up selective repair systems enabling independent repairers to become authorised repairers provided that they met criteria relating to their training, experience and equipment and the suitability of their premises. Those systems have been gradually set up by certain manufacturers at different times, while other manufacturers continued to supply spare parts to independent repairers outside that system. In relation to the alleged infringement of Article 101 TFEU, the General Court ruled, in reference to the Metro I judgment, that the organisation of such a distribution network is not prohibited by Article 101(1) TFEU, to the extent that resellers are chosen on the basis of objective criteria of a qualitative nature, laid down uniformly for all potential resellers and not applied in a discriminatory fashion, that the characteristics of the product in question necessitate such a network in order to preserve its quality and ensure its proper use and, finally, that the criteria laid down do not go beyond what is necessary. (para 53) The Court upheld the Commission decision that a selective distribution system and, by analogy, a selective repair system did not breach Article 101(1) TFEU, provided that it was objectively justified, nondiscriminatory and proportionate. (para 55) (For alleged abuse under Article 102 TFEU, see below 17.3.3.2.)

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A claim of general consumer welfare is often dismissed, however, as in VBBB and VBVB Agreement (Commission Decision 82/123/EEC ([1982] OJ L54/36)). In this case, the rejoinder was that the resale price maintenance scheme for books in the Flemish language in fact deprived consumers of choice and prevented them from getting discounts. No indispensable restrictions The third condition of Article 101(3) is that the agreement must not ‘impose on the undertaking concerned restrictions which are not indispensable to the attainment’ of the benefits above. The concept of proportionality is relevant here. The agreement itself and the restrictions of competition it contains must be necessary to achieve those benefits. The issue is whether or not more benefits are produced as the result of a more efficient activity under the restrictive agreement than there would be without such an agreement. The parties to the agreement must demonstrate that the efficiencies produced by the agreement are specific to it and that there are no other realistic and less restrictive alternatives to achieve those efficiencies, and that they could not have achieved them on their own. If the agreement is found to be necessary to achieve those benefits, it must then be assessed if the restrictions of competition it contains are reasonably necessary. The more serious the restriction, the stricter the test, as demonstrated in Case T-86/95 Compagnie générale maritime and others v Commission [2002] ECR II-1011, concerning an agreement between ship owners which fixed the price of transport services and the transport capacity management programme for containers to the Far East. In this case, the Court stated that … the contested agreement entails restrictions of competition that are not only extremely serious, but are, above all, not indispensable for attaining the objective of stability alleged by the applicants. (para 396) By definition, as the Guidelines state: Restrictions that are black listed in block exemption regulations or identified as hardcore restrictions in Commission guidelines and notices are unlikely to be considered indispensable. (para 79) Should a restriction of competition be indispensable for a certain period of time only, exemption from Article 101(1) TFEU will apply only for that time, in which case a detailed assessment of the length of time required to achieve the benefits has to be made, notably of the period of time required to ensure a proper return on the investments needed to achieve those benefits (see Case T-374/94 European Night Services Ltd (ENS) and others v Commission [1998] ECR II-3141, para 230). No substantial elimination of competition Finally, Article 101(3) provides that the agreement must not ‘afford [the] undertakings the possibility of eliminating competition in respect of a substantial part of the products in question’. As the aim of Article 101 TFEU is to maintain and protect competition between undertakings as a driver for economic efficiency, no elimination of competition can ever be justified by short-term benefits. It is necessary here to define the relevant product and geographical markets (see 16.3) before deciding whether the agreement has no eliminating effect. The Commission tends to be sceptical of this claim in the case where an undertaking

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controls a large market share. The Commission examines not only the terms of the agreement but also how they are implemented and what their practical effects are. For instance, in Ford - Werke AG, the Commission refused to approve a standard distribution agreement entered into by Ford Germany with all its main dealers because, as implemented, it did affect competition in that Ford ceased to supply righthand drive models to its German distributors so as to protect Ford of UK. This deprived consumers of the possibility of making personal imports. The ECJ agreed with the Commission’s conclusion that the refusal to supply compartmentalised markets. An agreement eliminating any important expression of competition such as, for instance, price competition (see Metro I, para 21; Case 161/84 Pronuptia de Paris GmbH v Pronuptia de Paris Irmgard Schillgallis [1986] ECR 353: clauses limiting the franchisee’s activities, such as price determination clauses, are not considered acceptable) will never satisfy this fourth condition. Finally, elimination of competition must occur ‘in respect of a substantial part of the products in question’, an autonomous EU law concept specific to Article 101(3) (see Case T-395/94 Atlantic Container Line AB and Others v Commission [2002] ECR II875, para 330). Once those four conditions are met, the agreement is regarded as improving competition by providing consumers cheaper or better products, thus outweighing its adverse effects on competition. It is to be noted, however, that the compatibility of an agreement with Article 101 TFEU does not prejudice the application of, and its compatibility with, Article 102 TFEU on abuse of dominant position (see below 17.3) (see Case T-51/89 Tetra Pak Rausing SA v Commission [1990] ECR II-309, para 29 and Joined Cases T-191/98, T-212/98 to T-214/98 Atlantic Container Line AB and Others v Commission [2003] ECR II-3275, para 1456). Individual exemptions applied by the European Commission and national competition authorities and courts under Articles 5, 6 and 10 of Regulation 1/2003

Article 101(3) TFEU Economic benefits: improving production or distribution of goods, or promoting technical or economic progress fair share for consumers no indispensable restriction of competition no elimination of competition

Block exemptions apply to categories of horizontal, vertical or mixed agreements adopted by the Council under Article 103(2)(b) TFEU and the Commission under delegated powers under Article 105(3) TFEU

Figure 17.4 Article 101(3)

Article 101(3) applies to individual agreements as well as to categories of agreements by way of block exemption regulations. 17.2.5.2

Block exemptions In order to alleviate its own pressure of work and to enable undertakings to be able to implement agreements without having to wait for clearance (see 18.3.2), the Commission drafted a series of regulations dealing with certain types of standard agreements on the basis of Article 105(3) TFEU. Used since the late 1960s (Regulation 67/67 on exclusive dealing agreements ([1967] OJ L57/849) was the first one), block exemption regulations (BERs) have become a well-established means of application of

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EU competition rules. Since then, many generations of regulations have reflected the economic development and evolution of European competition law. Taking more account of market power usually assessed on the market shares of the parties to an agreement, the European Commission has gradually abandoned a formalistic and legalistic approach to espouse a more sophisticated economic analysis. This new approach materialised in the adoption of the second generation of regulations at the turn of this century. The first regulation of this new generation was Regulation 2790/99 ([1999] OJ L336/ 21), a single exemption regulation on vertical agreements and concerted practices which replaced a series of three individual ones on distribution agreements. It was soon followed by the adoption of two regulations on horizontal agreements: Regulation 2658/2000 on specialisation ([2000] OJ L304/3) and Regulation 2659/2000 on research and development (R&D) ([2000] OJ L304/7), which replaced their respective predecessors of 1985. On the expiry of those BERs, a third generation of regulations and new guidelines were adopted in 2010 (Regulation 330/2010 on vertical agreements (VBER) ([2010] OJ L102/1)) and 2011 (Regulations 1218/2010 on specialisation ([2010] OJ L335/43) and 1217/2010 on R&D ([2010] OJ L335/36)) with the view to modernising the previous regulations. (HBERs). As the VBER expires on 31 May 2022 and the HBER on 31 December 2022, the adoption of the fourth generation of regulations has commenced with the review process of the VBER and related guidelines which was initiated in October 2018 on the basis of evaluation criteria set out in the evaluation roadmap of 8 November 2018 (Ares(2018)5722104), and of the HBERs (Ares(2020)1972062 - 07/04/ 2020). While agreements are generally classified as vertical and horizontal agreements, some, such as technology transfer agreements (TTAs) covered by Regulation 316/2014 ([2014] OJ L93/17), are regarded as mixed ones since they may contain horizontal and vertical restraints.

Substantive Competition Rules Applicable to Undertakings

First generation Regulation 67/67 on exclusive dealings Regulation 1983/83 on exclusive distribution agreements Regulation 1984/83 on exclusive purchasing agreements Regulation 4087/88 on franchise agreements Regulation 417/85 on specialisation agreements Regulation 418/85 on research and development agreements

Second generation Regulation 2790/1999 on vertical agreements and concerted practices Regulation 2658/2000 on specialisation agreements Regulation 2659/2000 on research and development agreements Regulation 1400/2002 on vehicle distribution agreements Regulation 823/2000 on agreements between liner shipping companies (consortia) Regulation 258/2003 on agreements in the insurance sector Regulation 772/2004 on technology transfer agreements Regulation 1459/2006 on passenger tariffs on scheduled air services and slot allocations at airports Regulation 169/2009 applying rules of competition to transport by rail, road and inland waterway

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Third generation Regulation 330/2010 on vertical agreements and concerted practices Regulations 1218/2010 on specialisation agreements Regulation 1217/2010 on research and development agreements Regulation 461/2010 on vehicle distribution agreements Regulation 316/2014 on technology transfer agreements Regulation 487/2009 on air transport sector Regulation 267/2010 on agreements in the insurance sector (expired on 31 March 2017) Regulation 906/2009 as amended by Regulation 697/2014 on agreements between liner shipping companies (consortia)

Figure 17.5 Block exemption regulations

Compared to individual exemptions, BERs have two main benefits: • they simplify the exemption procedure for economic agents and operators; and • they offer greater legal certainty to undertakings which no longer have to seek individual negative clearance from the Commission. They also provide undertakings with valuable information on standard agreements and their compatibility with competition rules. Provided an agreement complies with the model prescribed by the relevant regulation, it will be deemed compatible with Article 101(1) TFEU. This presumption is not without limits, however, as the European Commission and national competition authorities have, within their respective jurisdiction, the power to withdraw such exemption provided they can demonstrate that the agreement concerned does not satisfy the conditions of Article 101(3) TFEU. All BERs follow a set pattern: • they commence with a preamble (which is an important guide to subsequent interpretation); • they define the agreements they apply to and grant exemption from Article 101(1) to those which comply with the regulation terms; • they set aggregate market share thresholds beyond which exemption is not applicable (eg, 20% for specialisation and technology transfer agreements; 25% for

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research and development agreements; and 30% for vertical agreements). This is an indication that the higher the threshold, the less harmful to competition an agreement is viewed; and • they list prohibited hardcore restrictions (which prevent exemption) and the severable non-exempted restrictions (although prohibited, they do not prevent the remainder of the agreement from the benefit of the block exemption, so long as they can be severed from the agreement). Those regulations need to be read in light of their respective guidelines, the purpose of which is to provide guidance on the application of the BERs. They are without prejudice to the interpretation of Article 101 TFEU and those rulings that the Courts may give. These are: • Guidelines on vertical restraints ([2010] OJ C130/01); • Supplementary guidelines on vertical restraints in agreements for the sale and repair of motor vehicles and for the distribution of spare parts for motor vehicles ([2010] OJ C138/05); • Guidelines on the application of Article 101 TFEU to horizontal co-operation agreements ([2011] OJ C11/01); and • Guidelines on the application of Article 101 TFEU to technology transfer agreements ([2014] OJ C89/03). Are the entities undertakings or a trade association?

No

Yes Are there two or more undertakings?

No

Yes No

Is there an agreement? Yes Does it have a restrictive object?

No

Does it have restrictive effects?

Yes

Yes

Does it affect trade between the Member States? Yes Is it an agreement of minor importance?

No

No

No breach of Article 101 TFEU

Yes

No Is the agreement covered by a BER or does it satisfy Article 101(3) criteria?

Yes

No Breach of Article 101 TFEU

Figure 17.6 How a breach of Article 101 TFEU is established (‘agreement’ covers agreements, decisions of associations of undertakings and concerted practices)

17.3 Abuse of dominant position There are various economic objections to a monopoly. However, a pure monopoly, just like pure competition, is extremely rare, and competition law has to concern itself

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with firms with a sufficiently large market share to be able to derive benefits analogous to those of a monopolist. Article 102 TFEU places great emphasis on the idea of market power, a concept which has to be broken down into three separate issues: • the relevant product and geographical market (see 16.3); • the market power within that relevant market; and • within a substantial part of the internal market Under Article 102 TFEU: Any abuse by one or more undertakings of a dominant position within the internal market or a substantial part of it shall be prohibited as incompatible with the internal market in so far as it may affect trade between Member States.

17.3.1 Market power Unlike Article 66(7) of the now expired ECSC Treaty (see 1.5), which defined dominant position as protecting undertakings from effective competition in a substantial part of the (common) market, Article 102 TFEU offers no such definition. The relevant test is that laid down in Case 27/76 United Brands v Commission [1978] ECR 207 (see 16.3). In United Brands, the Court ruled that

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[t]he dominant position thus referred to relates to a position of economic strength enjoyed by an undertaking which enables it to prevent effective competition being maintained on the relevant market by affording it the power to behave to an appreciable extent independently of its competitors, customers and ultimately of its consumers. (para 65)

As the Court further put it in Hoffmann-La Roche (17.1 above): Such a position does not preclude some competition, which it does where there is a monopoly or a quasi-monopoly, but enables the undertakings which profit by it, if not to determine, at least to have an appreciable influence on the conditions under which that competition will develop and in any case to act largely in disregard of it so long as such conduct does not operate to its detriment. (para 39) It is therefore not necessary for an undertaking ‘to have eliminated all opportunity for competition in order to be in a dominant position’ (United Brands, para 113). Such dominance can exist not only in the supplier market but also in the buyer market, such as, for instance, the purchase of air travel services in the UK from travel agents (Case T-219/99 British Airways Plc v Commission [2003] ECR II-5917). It could be argued that the first part of the definition – preventing effective competition – is descriptive and that the key element is the ability to act independently. In order to assess the level of independence of an undertaking within the relevant market, the size of the firm’s market share is obviously a key question, though by no means conclusive. Save in exceptional circumstances, very large shares are in themselves evidence of the existence of a dominant position (see Hoffmann-La Roche, para 41). The case law shows that a market share of over 50% in itself constitutes a rebuttable presumption of the existence of a dominant position on the market in question (Case C-62/86 AKZO Chemie BV v Commission [1991] ECR I-3359, para 60). This view is corroborated in the Guidance on the Commission’s enforcement priorities

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in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings ([2009] OJ C45/2), in which the Commission indicates that [e]xperience suggests that the higher the market share and the longer the period of time over which it is held, the more likely it is that it constitutes an important preliminary indication of the existence of a dominant position and, in certain circumstances, of possible serious effects of abusive conduct … (para 15) Typical examples of such large market shares can be found in Case T-201/04 Microsoft Corp v Commission [2007] ECR II-3601 (over 90% of client PC operating systems and at least 60% of work group server operating systems market shares), Joined Cases T-24/93, T-25/93, T-26/93 and T-28/93 Compagnie maritime belge transports SA and Compagnie maritime belge SA, Dafra-Lines A/S, Deutsche AfrikaLinien GmbH & Co and Nedlloyd Lijnen BV v Commission [1996] ECR II-1201 (90% of maritime transport between Zaire and ports in northern Europe market share), Hoffmann-La Roche (85% of the vitamins A, B2, B3, B6, C and E markets), Case T-83/ 91 Tetra Pak International SA v Commission [1994] ECR II-755 (90% of the markets in aseptic machines and cartons intended for the packaging of liquid foods), Case T-228/ 97 Irish Sugar plc v Commission [1999] ECR II-2969 (market share of industrial sugar market and retail sugar market over 90%) and Case T-30/89 Hilti AG v Commission [1991] ECR II-1439 (70 to 80% of the market of powder-actuated fastening nails and cartridge strips and 55% of the nail guns market). But how small a share can a firm hold and yet still have a dominant position? While it is clear that a 10% market share is too small to constitute dominant position if there are no exceptional circumstances (see Case 75/84 Metro SB-Großmärkte v Commission (Metro II) [1986] ECR 3021), the case law shows that even firms with less than 50% of the market can be caught by Article 102. In some of the decisions such as United Brands, it can be queried whether by drawing the relevant product and geographical market too narrowly, the Commission then has the chance to overstate the market share, particularly as it tends to ignore pressures placed on the relevant undertaking from outside the relevant market. It would seem, however, that a market share of between 40 and 45% is generally enough to give rise to a dominant position, especially if all the rival firms have very small shares. In Virgin/British Airways Commission Decision 2000/74/EC ([2000] OJ L30/1), the Commission held British Airways to be in a dominant position in the market for air travel agency services, its share being 39.7% while that of Virgin, its nearest rival, was only 5.5%. The relationship between the market shares of the leading undertaking and of its next largest competitors therefore enables the competitive strength of the undertaking to be accurately assessed. The way the market share is calculated is clearly explained in the Commission Notice on the definition of relevant market for the purposes of Community competition law ([1997] OJ C372/5). Paragraph 53 states that [t]he definition of the relevant market in both its product and geographic dimensions allows the identification the suppliers and the customers/consumers active on that market. On that basis, a total market size and market shares for each supplier can be calculated on the basis of their sales of the relevant products in the relevant area. These are usually available from ‘companies’ estimates, studies commissioned from industry consultants and/or trade associations’. While a substantial market share as evidence of the existence of a dominant position is a highly important factor, it is not a constant one and its importance may vary from

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market to market in accordance with their structure. In Hoffmann-La Roche, the Court also recognised that ‘the existence of a dominant position may derive from several factors’ (para 39). Such relevant factors in assessing market power include, among others: • technical and commercial advantages such as the technological lead of an undertaking over its competitors (Hoffmann-La Roche) and the existence of a highly developed sales network (Case 322/81 NV Nederlandsche Banden Industrie Michelin v Commission (Michelin I) [1983] ECR 3461); • the absence of potential competition as the consequence of the existence of barriers preventing new competitors from having access to the market (Case 22/78 Hugin Kassaregister AB and Hugin Cash Registers Ltd v Commission [1979] ECR 1869; Case C-333/94 Tetra Pak International SA v Commission (Tetra Pak II) [1996] ECR I-5951; United Brands); • access to capital and vertical integration (United Brands; Case T-340/03 France Télécom SA v Commission [2007] ECR II-107); and • advertising campaigns and brand image (United Brands). The criticism can be made, however, that many of these factors are not considered true barriers to entry in orthodox economic theory because there is no reason why other firms cannot do the same. In particular, with regard to superior technology, it might seem difficult to see why the fact a defendant undertaking has invested in technology should prevent other firms starting up, since presumably the technology is open to all at no greater cost than it was to the defendant. Although Article 102 TFEU refers to ‘one or more undertakings’, the ECJ rejected in Hoffmann-La Roche the view that Article 102 could be used to control oligopolies (para 39). This view was reiterated in Joined Cases C-395/96 P and C-396/96 P Compagnie maritime belge transports SA, Compagnie maritime belge SA and Dafra-Lines A/S v Commission [2000] ECR I-1365, paras 20–22. Article 102 can apply only exceptionally to an agreement between two undertakings (Case 66/86 Ahmed Saeed Flugreisen and others v Zentrale zur Bekämpfung unlauteren Wettbewerbs [1989] ECR 803, para 36 et seq). Rather, what the phrase implies is that the market power and behaviour of organically related undertakings can be aggregated. The issue then becomes whether the companies are so closely related to each other that they can be regarded as one economic unit, in other words, whether there is collective or joint dominance. As the Court stated in Compagnie maritime belge (2000): It follows that the expression ‘one or more undertakings’ in Article [102] of the Treaty implies 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. (para 36) In an appeal heard from Commission Decision 89/93/EEC in Flat glass ([1989] OJ L33/44), where it ruled that a three-company oligopoly could be liable under both former Articles 85 and 86 TEEC (now Articles 101 and 102 TFEU) for collective abuse of its dominant position in the Italian flat glass industry, the Court agreed that collective dominance might exist when two or more undertakings sharing a technological lead through a technological agreement or licence could, being ‘united by such economic links’, be able to behave to an appreciable extent independently from their competitors on the same market (Joined Cases T-68/89, T-77/89 and T-78/89

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Società Italiana Vetro SpA, Fabbrica Pisana SpA and PPG Vernante Pennitalia SpA v Commission (Re Italian Flat Glass) [1992] ECR II-1403, para 358 and Compagnie maritime belge (1996), para 60). Undertakings may be linked as to their conduct on a particular market by an agreement, decision or concerted practice covered by Article 101 TFEU to such an extent that they will appear on that market to their competitors, trading partners and consumers as a collective entity. As the Court stated in Compagnie maritime belge (2000), although the existence of an agreement or other links in law is not indispensable to establish a collective dominant position, such dominance may … flow from the nature and terms of an agreement, from the way in which it is implemented and, consequently, from the links or factors which give rise to a connection between undertakings which result from it. (para 45) Also, quite logically, as the Court put it in Case C-413/06 P Bertelsmann AG and Sony Corporation of America v Independent Music Publishers and Labels Association (Impala) [2008] ECR I-4951, in the case of an alleged creation or strengthening of a collective dominant position, it must be assessed whether a concentration (see 17.4) may lead to effective competition being significantly impeded by undertakings which are parties to it and … which together, in particular because of correlative factors which exist between them, are able to adopt a common policy on the market … in order to profit from a situation of collective economic strength, without actual or potential competitors, let alone customers or consumers, being able to react effectively. (para 120)

17.3.2 Dominance in a substantial part of the internal market Article 102 requires that the abuse of dominant position takes part ‘within the internal market or in a substantial part of it’. Read in conjunction with the condition that the abuse of dominance has an effect on trade between the Member States (see 16.4), this requirement is designed to delineate the jurisdiction of the EU. It is this element which has received the least attention in the case law, and there is no precise test. The issue is not simply one of geography because, as the Court ruled in Suiker Unie, [f]or the purpose of determining whether a specific territory is large enough to amount to ‘a substantial part of the [internal] market’ within the meaning of Article [102] of the Treaty the pattern and volume of the production and consumption of the said product as well as the habits and economic opportunities of vendors and purchasers must be considered. (para 371, emphasis added) Equally, no particular percentage is critical in deciding what is substantial, nor has the Court ever specified one. However, in Case 77/77 Benzine en Petroleum Handelsmaatschappij BV and others v Commission [1978] ECR 1513, AdvocateGeneral Warner considered the Dutch market for petrol amounting to some 4.6% of the then European Community market as a whole to be substantial (at 1537). To a certain extent this could be seen as a parallel with the de minimis doctrine under Article 101 (see The prevention, restriction or distortion of competition above). Not only individual Member States are likely to constitute a substantial part of the internal market (eg, the UK in Case 226/84 British Leyland plc v Commission [1986] ECR 3263 or Belgium in Case 127/73 Belgische Radio en Televisie and société belge des auteurs, compositeurs et éditeurs v SV SABAM and NV Fonior [1974] ECR 51), but also

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parts of them, such as South Germany (Suiker Unie) or even a small area of the French territory for which insemination centres were each granted an exclusive licence by the French government (Case C-323/93 Société Civile Agricole du Centre d’Insémination de la Crespelle v Coopérative d’Elevage et d’Insémination Artificielle du Département de la Mayenne [1994] ECR I-5077). Even a port can be regarded as such, as in Case C-179/90 Merci convenzionali porto di Genova SpA v Siderurgica Gabrielli SpA [1991] ECR I5889 in which the Italian port of Genova was deemed to play an important part in the trade between Italy and the rest of the European Union (see also B&I/Sealink, Holyhead Commission Decision [1992] 5 CMLR 255 and Sea Containers v Stena Sealink Commission Decision 94/19/EC ([1994] OJ L15/8). This concept means that Article 102 is not reserved just for the industrial giants of this world and that even a comparatively small firm could find itself caught.

17.3.3 Abuse Article 102 TFEU does not prohibit an undertaking from acquiring, on its own merits, a dominant position in a market. As such, the finding that an undertaking has a dominant position is not in itself a ground of criticism or a recrimination (see Case 322/81 NV Nederlandsche Banden-Industrie-Michelin v Commission [1983] ECR 3461, para 57 and Compagnie maritime belge (2000), para 37). Nonetheless, according to settled case law (see, in particular, Tetra Pak, para 114 and Case C-202/07 P France Télécom SA v Commission [2009] ECR I-2369, para 105), an undertaking in a dominant position … has a special responsibility not to allow its conduct to impair genuine undistorted competition in the internal market. Article 102 refers to the abuse of dominant position and, while it provides no definition of this concept, it offers a non-exhaustive enumeration of certain types of monopoly behaviour (see Case T-321/05 AstraZeneca AB and AstraZeneca plc v Commission [2010] ECR II-2805, adding to this list misleading representations and deregistration of marketing authorisations). As Article 102 TFEU states: Such abuse may, in particular, consist in: (a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions; (b) limiting production, markets or technical development to the prejudice of consumers; (c) applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage; (d) making 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. The concept of ‘competitive disadvantage’ under Article 102 second paragraph, subparagraph (c) has been interpreted by the Court in Case C-525/16 MEO – Serviços de Comunicações e Multimédia SA v Autoridade da Concorrência EU:C:2017:1020 as meaning that where a dominant undertaking applies discriminatory prices to trade partners on the downstream market, it covers a situation in which that behaviour is capable of distorting competition between those trade partners. (para 37)

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Though proof of actual quantifiable deterioration in the competitive situation is not required, a finding of … a competitive disadvantage … must be based on an analysis of all the relevant circumstances of the case leading to the conclusion that that behaviour has an effect on the costs, profits or any other relevant interest of one or more of those partners, so that that conduct is such as to affect that situation. (ibid) 17.3.3.1

Concept of abuse Save in some cases (eg predatory pricing, selective discount or refusal to supply), there is no need for intention or fault since the concept of abuse is … an objective concept relating to the behaviour of an undertaking in a dominant position which is such as to influence the structure of a market where, as a result of the very presence of the undertaking in question, the degree of competition is weakened and which, through recourse to methods different from those which condition normal competition in products or services on the basis of the transactions of commercial operators, has the effect of hindering the maintenance of the degree of competition still existing in the market or the growth of that competition. (Hoffmann-La Roche, 17.1 above, para 91) As explained in Tetra Pak II, the application of Article 102 presupposes … a link between the dominant position and the alleged abusive conduct (para 27) Consequently, conduct must produce effects on the dominated market. However, in Tetra Pak II, the Court accepted that if conduct has effects on a distinct, but associated, non-dominated market, the application of Article 102 to that conduct can only be justified by special circumstances (see para 27). Further, it is presumed that, as the sole presence of the dominant undertaking has already weakened the structure of competition on the market, ‘any further weakening of the structure of competition may constitute an abuse of a dominant position’ (Hoffmann-La Roche, para 123). It is therefore not necessary to fix an appreciability threshold (de minimis) in order to determine such abuse since ‘[t]hat anticompetitive practice is, by its very nature, liable to give rise to not insignificant restrictions of competition, or even of eliminating competition on the market on which the undertaking concerned operates’ (see Case C-23/14 Post Danmark A/S v Konkurrencerådet EU:C:2015:651, para 73 and MEO, para 29 (emphasis added)).

17.3.3.2

Types of abuse Exploitative and exclusionary (or anti-competitive) abuses are the two main categories of abuse, but many kinds of abusive behaviour can be both exploitative and exclusionary at the same time. This distinction originates from the Continental Can case in which the Court stated that … the provision is not only aimed at practices which may cause damage to consumers directly, but also at those which are detrimental to them through their impact on an effective competition structure …. Abuse may therefore occur if an undertaking in a dominant position strengthens such position in such a way that the degree of dominance reached substantially fetters competition … (para 26)

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According to the Guidance on the Commission’s enforcement priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings, exclusionary abuses (anti-competitive foreclosure) cover situations … where effective access of actual or potential competitors to supplies or markets is hampered or eliminated as a result of the conduct of the dominant undertaking whereby the dominant undertaking is likely to be in a position to profitably increase prices to the detriment of consumers. (para 19) It appears from this definition that exclusionary abuse includes: • foreclosure (‘access of actual or potential competitors to supplies or markets is hampered or eliminated’), thus preventing or weakening competition from other competitors in the same market; and • harm to consumers (‘the dominant undertaking is likely to be in a position to profitably increase prices to the detriment of consumers’), the exploitation of consumers being the logical consequence of the elimination of competitors. For the Court, the latter element is the defining one, as is clear from Case C-52/09 Konkurrensverket v TeliaSonera Sverige AB [2011] ECR I-527, para 24 and Case C-209/ 10 Post Danmark A/S v Konkurrencerådet EU:C:2012:172: It is apparent from case-law that Article [102 TFEU] covers not only those practices that directly cause harm to consumers but also practices that cause consumers harm through their impact on competition …. It is in the latter sense that the expression ‘exclusionary abuse’ … is to be understood. (para 20) Examples of such abuse are: • exclusive dealing: obligation or incentive for the buyer to make all its purchases from one dealer only (Hoffmann-La Roche); • tying and bundling: the purchase of the main product or service is made conditional on the purchase of other products or services (tie-in); when the latter product (tied product) is already incorporated into the former (tying product), this is bundling (Hilti AG; Tetra Pak II; Microsoft Commission Decision COMP/C-3/ 37.792 (C(2004)900 final) and Microsoft Corp); • import and export bans (Suiker Unie); • refusing to supply an existing customer (ICI & CSC; Hugin and Microsoft Corp; Case T-301/04 Clearstream Banking AG and Clearstream International SA v Commission EU:T:2009:317: refusal to supply financial services; Case T-827/14 Deutsche Telekom AG v Commission EU:T:2018:930 and Case T-851/14 Slovak Telekom, a.s. v Commission EU:T:2018:929: refusal to provide unbundled access to the operator’s local loops on the Slovakian broadband internet services). However, non-discriminatory and objectively justified refusals are permissible (see Confédération européenne des associations d'horlogers-réparateurs (CEAHR): as a selective repair system for prestige Swiss watches was set up on the basis of qualitative criteria (see ‘Case Example at 17.2.5.1), the refusal to supply spare parts to unauthorised repairers was not sufficient to establish the existence of an abuse. Such refusal could also be explained by objective justifications and the pursuit of productivity gains, notably the preservation of brand image and the quality of products, the prevention of counterfeiting and the increase in the technical complexity of mechanical watches, thus justifying high quality repair); • refusing to licence intellectual property rights: this is a more difficult area as mere ownership of intellectual property rights does not establish dominance, and the

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outcome of the case would seem to depend on the nature of the product and whether the licence relates to initial marketing or the sale of replacement parts (Joined Cases C-241 and 242/91 P Radio Telefis Eireann (RTE) and Independent Television Publications Ltd (ITP) v Commission (Magill) [1995] ECR I-743: the refusal to licence the copyright in TV programme listings was held to be an abuse; by contrast, Case 238/87 AB Volvo v Erik Veng (UK) Ltd [1988] ECR 6211 and Case 53/87 CICRA v Régie nationale des usines Renault [1988] ECR 6039: the refusal to licence the copyright in the design for replacement car body panels was held not to be abusive); denying access to essential facilities, such as intellectual property rights, bus stations, ports, etc. A facility is said to be essential if access to it is indispensable to compete in a related market and whose duplication is impossible or very difficult for physical geographic or legal constraints, or is not desirable for reasons of public policy (see Magill and Case C-7/97 Oscar Bronner GmbH & Co KG v Mediaprint Zeitungs [1998] ECR I-7791: refusal of a media undertaking holding a dominant position in the territory of a Member State to include a rival daily newspaper of another undertaking in the same Member State in its newspaper home-delivery scheme). The refusal of access to an essential facility is abuse if: – it is likely to eliminate competition in the downstream market from the person requiring access to the essential facility; – it is not objectively justified; – access to the facility is indispensable for carrying on business; and – there is no actual or potential substitute for the essential facility. However, in Case C-418/01 IMS Health GmbH v NDC Health GmbH [2004] ECR I-5039, concerning a brick structure used to supply regional sales data for pharmaceutical products in a Member State, the ECJ attempted to readjust balance between protection of intellectual property rights and innovation. The Bronner conditions do not apply though to sectors of the economy covered by legislation which defines the legal framework applicable to them and contributes to the determination of the competitive conditions within them (Deutsche Telekom AG v Commission and Slovak Telekom, a.s. v Commission: no need for the Commission to establish the indispensable nature of access to the local loops to the exercise of the activity of competitor operators in the retail market for fixed broadband services in Slovakia, paras 104–128); loyalty bonuses or rebates: though in themselves they are not abuses, they may breach Article 102 if they are not based on economic considerations and restrict the purchaser’s freedom to choose other sources of supply or restrict market access to competitors, etc (Hoffmann-La Roche; Hilti AG; Compagnie maritime belge (1996); Michelin I; Case T-203/01 Manufacture française des pneumatiques Michelin v Commission (Michelin II) [2003] ECR II-4071; British Airways plc; Case T-286/09 Intel Corp v Commission EU:T:2014:547). According to settled case law (see Michelin I, paras 71–73 and Case C-95/04 British Airways v Commission EU:C:2007:166, paras 62, 63, 65, 67 and 68), there are three categories of rebates, namely: – quantity rebates: linked only to the volume of purchases made from an undertaking in a dominant position, they are generally considered not to have the foreclosure effect prohibited by Article 102 TFEU and can be deemed to reflect gains in efficiency and economies of scale made by the undertaking in a dominant position if the increase of the quantity supplied

Substantive Competition Rules Applicable to Undertakings

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results in lower costs for the supplier who can then pass on that reduction to the customer in the form of a more favourable tariff (see Michelin II, para 58); exclusivity rebates (also known as fidelity rebates within the meaning of Hoffmann-La Roche): conditional on the customer’s obtaining all or most of the requirements from the undertaking in a dominant position, they are regarded as incompatible with the objective of undistorted competition because they are not based on an economic transaction justifying such burden or benefit but are rather designed to remove or restrict the purchaser’s freedom to choose his sources of supply and to deny other producers access to the market (see Hoffmann-La Roche, paras 71 and 90, and Case T-155/06 Tomra Systems ASA and Others v European Commission, EU:T:2010:370, paras 72 and 209). By granting a financial advantage, they are designed to prevent customers from obtaining their supplies from competing producers (Hoffmann-La Roche, paras 71 and 90 and Tomra, paras 72 and 210); and rebate falling within a third category: this category includes other rebate systems in which the financial incentive is not directly linked to a condition of exclusive or quasi-exclusive supply from the undertaking in a dominant position but which come with a fidelity-building effect mechanism such as, for instance, the attainment of individual sales objectives. In order to determine whether such rebate is an abuse of dominance,

it is necessary to consider all the circumstances, particularly the criteria and rules governing the grant of the rebate, and to investigate whether, in providing an advantage not based on any economic service justifying it, that rebate tends to remove or restrict the buyer’s freedom to choose his sources of supply, to bar competitors from access to the market, or to strengthen the dominant position by distorting competition. (see Intel, para 78); predatory pricing: the dominant undertaking drops its prices below costs over a certain period of time with the view to driving competitors out of the market or stopping potential competitors from accessing it, thus gaining long-term profit in a more solidified market position (AKZO Chemie BV; Wanadoo Interactive Commission Decision COMP/38.223 and France Télécom SA); margins squeezes (effet de ciseau): previously referred to as price squeezing (see Case T-5/97 Industrie des poudres sphériques SA v Commission EU:T:2000:278, para 178), margin squeezes arise when an upstream undertaking in a dominant position produces an input (wholesale product) for which there are no good substitutes (essential or bottleneck input) and sells it to one or more of its own competitors on the downstream market at prices set at such a level (either setting high prices for the input or charging low prices on the downstream market or both) that its downstream rivals cannot effectively compete with it or survive as a result of the margin between the dominant undertaking’s price for selling the upstream product to its rivals and its own downstream price being ‘too small’. When assessing the effects of a squeeze, it is necessary to consider the functional relationship between the wholesale product and the retail one. The issue is whether the former is indispensable for the sale of the latter or not. Where the wholesale product is indispensable, the potentially anti-competitive effect of a margin

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squeeze is then probable since competitors who are at least as efficient as the dominant undertaking and who can only operate on the retail market at a loss or with reduced profitability suffer a competitive disadvantage on that market preventing or restricting their access to it or the growth of their activities on it (see Case C-280/08 Deutsche Telekom AG v Commission EU:C:2010:603, para 234; TeliaSonera Sverige AB, paras 69–71 and T-336/07 Telefónica, SA and Telefónica de España, SA v Commission EU:T:2012:172, para 182). If the wholesale product is not indispensable, it must then be demonstrated that the pricing practice causing margin squeeze may be capable of having anti-competitive effects on the markets concerned (see TeliaSonera Sverige AB para 72). Not all margin squeezing can amount to an abuse since the dominant firm cannot be held responsible for its rivals’ lack of efficiency. If it is sufficiently efficient to be able to sell its products or services without doing so at a loss, any complaint by its rivals about margin squeezing on its part might be an indication of their own lack of efficiency. To assess whether this is the case, the dominant firm’s fixed and variable costs and the relevant market must be analysed. In the case where the dominant undertaking owns a network, such as a telecommunications one, the network maintenance and development costs must be taken into account and compared to access charges offered to its rivals for the use of that network (see Deutsche Telekom AG and TeliaSonera Sverige AB). Former monopolistic undertakings operating such networks are often accused of imposing margin squeezing through network access charges and are often required by competition authorities to bring their charges below what would constitute normal remuneration but based on incremental costs (see Commission Decision in Case COMP/38.784 Wanadoo España vs Telefónica (C (2007) 3196 final) and Case C-271/03 Deutsche Telekom AG v Commission EU:T:2008:101). For an example where the Commission failed to prove the exclusionary effect of a margin squeeze, see Deutsche Telekom AG and Slovak Telekom, a.s. Exploitation, on the other hand, imposes unfair conditions on consumers. It notably includes: • unfairly high (excessive) pricing: prices are deemed excessive if there is ‘no reasonable relation to the economic value of the product supplied’ (United Brands; Case 26/75 General Motors Continental NV v Commission [1975] ECR 1367; Case 226/84 British Leyland plc v Commission [1986] ECR 3263; Clearstream Banking AG and Clearstream International SA; Case C-177/16 Autortiesību un komunicēšanās konsultāciju aģentūra / Latvijas Autoru apvienība v Konkurences padome EU:C:2017:689); • unfair trading conditions (United Brands; 1998 Football World Cup Commission Decision 2000/12/EC ([2000] OJ L5/55)). Discrimination and reprisals are two other forms of abuse: • discriminatory pricing of a uniform product (United Brands); discriminatory discounts (Michelin and Hilti); • discriminatory treatment (British Airways plc; Hilti); • discriminatory prices (United Brands; Case C-497/99 P Irish Sugar plc v Commission [2001] ECR I-5333); • retaliatory refusal to supply an existing customer (ICI & CSC; United Brands).

Substantive Competition Rules Applicable to Undertakings

The Intel saga

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e cas ple m exa

The Commission’s decision In its Decision of 13 May 2009 (COMP/C-3 /37.990 – Intel), the Commission imposed a fine of €1.06 billion on Intel, the American microchip manufacturer, for having abused its dominant position on the market for x86 central processing units (CPUs), on the ground that it held a market share of roughly 70% or more and that, given its strong dominant position, first, Intel customers had no choice but to obtain part of their requirements from Intel since it was an unavoidable supplier of x86 CPUs, and, second, it was extremely difficult for competitors to enter the market and to expand as a result of the unrecoverable nature of investments in research and development, intellectual property and production facilities. The abuse was characterised, first, by the implementation of a series of conditional rebates to its own customers (computer manufacturers Dell, Lenovo, HP and NEC) and to a European retailer of microelectronic devices, Media-Saturn-Holding (MSH), and, secondly, by measures preventing or delaying the launch of computers based on competing products, namely AMD CPU-based products, and/ or putting restrictions on the distribution of those products (so-called ‘naked restrictions’). The rebates were granted to the four computer manufacturers on the condition that they purchased from Intel all or almost all of their x86 CPUs, and payments were awarded by Intel to Media-Saturn on the condition that the latter sold exclusively computers containing Intel’s x86 CPUs. The Commission viewed those rebates and payments as inducing the loyalty of the four manufacturers and of Media-Saturn, and as significantly diminishing the ability of Intel’s competitors to compete on the merits of their x86 CPUs. It also regarded Intel’s conduct as resulting in a reduction of consumer choice and in lower incentives to innovate. Further, Intel was found to have generally sought to conceal the conditions in its arrangements with PC manufacturers and MSH by either concluding them orally only (Dell) or by keeping the relevant conditions unwritten where there was a written agreement (HP) or by including in the written agreement a clause that the deal was non-exclusive when, in reality, it was exclusive (MSH). The judgment of the General Court By its judgment in Case T-286/09 Intel Corp v Commission EU:T:2014:547, the General Court upheld the fine imposed on Intel for having abused its dominant position on the market for x86 CPUs between 2002 and 2007 and dismissed Intel’s action. After recalling the distinction between the three categories of rebates (see above 17.3.3.2), the Court noted that the rebates granted to Dell, HP, NEC and Lenovo are rebates falling within the second category, namely exclusivity rebates. Based on an analysis of the extensive case law of the CJEU, notably Hoffmann-La-Roche, Michelin I and British Airways plc, the Court observed that as exclusivity rebates ‘are by their very nature capable of restricting competition’ (para 85, emphasis added) and foreclosing competitors from the market, it is thus not necessary to show that they are capable of restricting competition on a case by case basis in the light of the facts of the individual case. As a result, the Court rejected Intel’s arguments that the Commission was required to carry out an analysis of the circumstances of the case in order to show that the rebates had at least a potential foreclosure effect (paras 95–101) or to prove an actual foreclosure effect (paras 102–105). In that context, the Court rejected Intel’s arguments that the ‘as efficient competitor’ (AEC) test was an important factor in order to establish the potential foreclosure effect of the rebates at issue (paras 140– 166). This test is ‘designed to determine whether the competitor which is as efficient as the undertaking in a dominant position, which faces the same costs as the latter, can still cover its costs in that case’ (para 141).

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The Court ruled that it was not necessary to examine, by means of the AEC test, whether the Commission correctly assessed the ability of the rebates to foreclose a competitor as efficient as Intel since, as the Court put it, ‘a foreclosure effect occurs not only where access to the market is made impossible for competitors, but also where access is made more difficult’ (paras 88 and 149), and the ‘AEC test only makes it possible to verify the hypothesis that access to the market has been made impossible and not to rule out the possibility that it has been made more difficult’. (para 150). The Court added that even a positive AEC test result would not be capable of ruling out the potential foreclosure effect which is inherent in the exclusive rebate mechanism (para 151). Further, the General Court found that practices, which the Commission termed ‘naked restrictions’, amounted to an abuse of a dominant position: the payments made to HP, Acer and Lenovo for them to postpone, cancel or restrict the marketing of certain products equipped with AMD CPUs were capable of making access to the market more difficult for AMD; also Intel pursued an anti-competitive object since the only interest it may have had in preventing in a targeted manner the marketing of products equipped with a AMD product was to harm AMD as a competitor. The judgment of the Court of Justice By its judgment in Case C-413/17 Intel Corp v Commission EU:C:2017:632, the Court of Justice first observed that, … while the Commission emphasised, in the decision at issue, that the rebates at issue were by their very nature capable of restricting competition such that an analysis of all the circumstances of the case and, in particular, an AEC test were not necessary in order to find an abuse of a dominant position … it nevertheless carried out an in-depth examination of those circumstances, setting out … a very detailed analysis of the AEC test, which led it to conclude … that an as efficient competitor would have had to offer prices which would not have been viable and that, accordingly, the rebate scheme at issue was capable of having foreclosure effects on such a competitor. (para 142) The Court therefore concluded that, in the Commission’s decision, ‘the AEC test played an important role in the … assessment of whether the rebate scheme at issue was capable of having foreclosure effects on as efficient competitors’ (para 143). Consequently, the Court held that the General Court was required to examine all of Intel’s arguments concerning that test, notably those seeking to expose the errors allegedly committed by the Commission in the AEC test, which the General Court failed to do (paras 144-147) and set aside the General Court’s judgment with regard to this failure. The case was then referred back to the General Court for a re-examination of Intel’s arguments in this

17.3.3.3

Objective justification of an abuse Although Article 102 TFEU does not include exceptions to the prohibition of abuse as Article 101 TFEU does for anti-competitive agreements, the development of the economic approach and, with it, the focus on consumer welfare and advantages for the consumer, has naturally and gradually led to the question as to whether and to what extent an abuse of dominance can be justified objectively (see Guidance on the Commission’s enforcement priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings, paras 28–31). The fact that an abusive conduct might be justified by objective reasons in the general interest, provided that it is necessary and proportionate, has already been accepted by the Court in its early jurisprudence (see United Brand, para 184; Case 311/84 Centre Belge d'études de marché — Télémarketing (CBEM) v Compagnie luxembourgeoise de télédiffusion (CLT) and Information publicité Benelux (IPB) [1985] ECR 3261, para 27; Hilti, paras 102–119; Case T-83/91 Tetra Pak International v Commission [1994] ECR

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II-755, paras 136 and 207; British Airways [2007], paras 69 and 86). This approach has been adopted by the Commission in the above-mentioned Guidance. First, non-economic imperative requirements of general interest such as protection of public health (see Cases C-466/06 to 478/06 Sot. Lélos kai Sia EE and Others v GlaxoSmithKline AEVE Farmakeftikon Proïonton, formerly Glaxowellcome AEVE EU:C:2008:504), protection of the environment (see Case C-209/98 Entreprenørforeningens Affalds/Miljøsektion (FFAD) v Københavns Kommune EU:C:2000:279) or the operation of services of general economic interest entrusted by a public authority (see unsuccessful claims in Case T-151/91 Der Grüne Punkt - Duales System Deutschland GmbH v Commission EU:T:2007:154 and Case C-385/07 Der Grüne Punkt - Duales System Deutschland GmbH v Commission EU:C:2009:456) may justify an abusive conduct provided it is necessary and proportionate. Secondly, abusive conduct leading to foreclosure of competitors may be also justified on the ground of efficiencies provided no net harm to consumers is likely to occur. This ground for justification is based on a subtle balance between procompetitive and anti-competitive aspects of the conduct of the dominant undertaking. Indeed, the advantages in terms of efficiency benefiting the consumer must outweigh the exclusionary effect of the conduct which is disadvantageous for competition (see TeliaSonera Sverige, para 76), and the latter must not go beyond what is necessary in order to attain those advantages (British Airways plc, para 86 and Post Danmark, paras 41–42). As the Commission explains in para 30 of the Guidance, it is for the dominant undertaking to demonstrate, ‘with a sufficient degree of probability, and on the basis of verifiable evidence’, that four cumulative conditions are satisfied, namely that: • the efficiencies are, or are likely to be, created as a result of the conduct (eg, technical improvements in the quality of goods or reduction in the cost of production or distribution); • the conduct is indispensable to the creation of those efficiencies, ie they may not be produced by no less anti-competitive alternatives to the conduct; • any likely negative effects on competition and consumer welfare in the affected markets are counterbalanced by those efficiencies; and • effective competition is not eliminated as a result of existing sources of actual or potential competition being removed. However, this balancing act is a delicate one when it comes to comparing the advantages the dominant firm gets from its own conduct and the objective advantages that might benefit the consumers (see Microsoft).

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Is the entity an undertaking?

No

Yes Does it have market power (a position of economic strength enabling it to act independently) in the relevant product and geographic market?

No

Yes Has is abused its power? Exclusionary abuse Exploitative abuse Reprisal Discrimination

No

Yes In a substantial part of the internal market

No

Yes Does the abuse of dominant position affect trade between the Member States?

No

No breach of Article 102 TFEU

Yes Breach of Article 102 TFEU

Figure 17.7 How a breach of Article 102 TFEU is established

One particularly important area of anti-competitive abuse is concentrations. In Continental Can, the Court ruled that it would be an abuse for a dominant undertaking to increase that dominance through the acquisition of a competitor although, in this case, it held that the Commission had failed to establish on the facts that competition would be eliminated. The use of Article 102 for control of concentrations laid dormant until Commission Decision 88/501/EEC in Tetra Pak I ([1988] OJ L272/27). Here, Tetra Pak took over a competitor (Liquipak) with the result that it also acquired an exclusive patent licence granted to Liquipak concerned with the packaging of long-life milk. This excluded Elopak, which had been cooperating in the new technology, from access to the information. The Commission upheld Elopak’s complaint that Tetra Pak had strengthened its own dominant position and withdrew from Tetra Pak the benefit of the Patent Licensing Block Exemption. Tetra Pak’s appeal against the Commission Decision was rejected by the Court in Tetra Pak (17.2.5.1 above).

17.4 Concentrations Concentration is a generic term to designate the process whereby companies either merge into one or whereby one company takes control of another by acquisition. On the one hand, concentrations can have a significant market impact on competition, can be used to strip the assets of the acquired firm and, through rationalisation of existing plants, may have an adverse impact on employment and regional vitality. On the other, concentrations contribute to improving economic and managerial efficiency. They render possible economies of scale and increase distributional efficiency. They also increase management efficiency through fear or threat of takeover, and improve dissemination of technology. Furthermore, within the context of the European single market, concentrations can lead to integration and greater rationalised market interpenetration. Yet, as with oligopolies, there is no specific provision in the EU Treaties which addresses the issue of concentrations. The reason for this is that, in the 1950s, the main post-war concern was reconstruction and the fragmentation of the European industry. Concentrations were thus seen as a good thing that needed to be encouraged rather than prevented. Member State governments, which controlled the major industrial

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companies or groups, were also keen to operate concentrations to their own benefit and were not ready at the time to relinquish control of those to the European Community institutions. This explains why the framers of the original Treaties treaded carefully in this domain and why only the 1951 ECSC Treaty (see 1.5) provided, under Article 66, comprehensive rules on concentrations of companies in the steel and coal industry. In a Memorandum on mergers within the common market of 1965, the European Commission, concerned by the increasing number of concentrations in the 1960s and 1970s, advocated, however, the need for control of concentrations, albeit limited to those potentially leading to monopolies. Nonetheless, with the exception of a few countries (the German 1957 Gesetz gegen Wettbewerbsbeschränkungen (GWB) and the UK 1965 Monopolies and Mergers Act, replaced by the 1973 Fair Trading Act), national legislation on mergers and takeovers was slow to come and the pace only started to quicken in the late 1980s. By 1989 Germany, France, the UK and Ireland had full concentration legislation. They were joined by the Netherlands (Medelinngingswet) and Finland (Laki Kilpailunrajoituksista) in 1998, and Denmark (Lov om ændring af Konkurrenceloven) in 2000. Luxembourg remains the only Member State with no specific law on concentration. At EU level, it was not until 1989 that Regulation 4064/1989 on the control of concentrations between undertakings (the EC Merger Regulation) ([1989] OJ L395/1) was adopted and later amended in 1998 by Regulation 1310/1997 ([1997] OJ L180/1). It was the first serious attempt at consolidating EC rules on mergers. Following the Green Paper of 11 December 2001 on the review of the 1989 Regulation (COM(2001) 745 final), a wide reform dealing with substantive, jurisdictional and procedural issues was launched. This overall review of merger legislation led to the adoption in January 2004 of Regulation 139/2004 ([2004] OJ L24/ 1) which came into force on 1 May 2004, the day of the enlargement to include 10 Mediterranean, Central and Eastern European countries (see 1.4). Compared to the reform of procedure under Regulation 1/2003 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty ([2003] OJ L1/1) (see 18.2), the reform of merger legislation was of limited amplitude. This can be explained by the fact that the former system had produced satisfactory results on the whole over its 14 years of existence. The basic principles of control of concentrations remained unchanged: • EU control is ex ante and based on the obligation to notify to the Commission the proposed merger; • the definition of a concentration remains unchanged – most of the proposed suggestions having then been rejected; and • the emphasis on the change of control which must be on a lasting basis remains. Essentially, however, the 2004 EC Merger Regulation re-delineated the powers and competence between the Commission and the national authorities (jurisdictional thresholds), improved the control procedure and modified the concentration assessment criteria. It is widely recognised that the 2004 Regulation has certainly rendered the control of concentrations within the EU more efficient and contributed to preserving effective competition in the European internal market. Yet 10 years of experience have also highlighted that some aspects of this control regime still needs improvement. For this reason, in July 2014, the European Commission launched a public consultation on

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proposals to improve control of concentrations. These are outlined in a White Paper, ‘Towards more effective EU merger control’ (COM(2014) 449 final). Their primary aim is to: • allow the Commission to deal more efficiently with non-controlling minority shareholdings which may have harmful effects on competition; • make referral procedures between Member States and the Commission simpler and faster; • make procedures simpler; and • foster coherence and convergence between Member States. The 2004 Regulation must be read in conjunction with: • the Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of concentrations between undertakings ([2004] OJ C31/5); and • the Guidelines on the assessment of non-horizontal mergers under the Council Regulation on the control of concentrations between undertakings ([2008] OJ C265/7). According to its first Article, … this Regulation shall apply to all concentrations with a [Union] dimension as defined in this Article. In other words, to be appraised under the EU merger control regime, a concentration operation must satisfy two conditions: • it must fall within the definition of concentration provided for under Article 3 of the Regulation; and • it must have a Union dimension.

17.4.1 Definition of a concentration Under Article 3(1) of the 2004 Merger Regulation: A concentration shall be deemed to arise where a change of control on a lasting basis results from: (a) the merger of two or more previously independent undertakings or parts of undertakings, or (b) the acquisition, by one or more persons already controlling at least one undertaking, or by one or more undertakings, whether by purchase of securities or assets, by contract or by any other means, of direct or indirect control of the whole or parts of one or more other undertakings. Two elements are to be considered here: • first, as recital 20 in the preamble to the 2004 Merger Regulation explains, the concept of concentration is intended to relate to operations which bring about a lasting change in the structure of the market; • secondly, as the Commission makes it clear in its Consolidated Jurisdictional Notice under Council Regulation (EC) No 139/2004 on the control of concentrations between undertakings ([2008] OJ C95/01), ‘the test in Article 3 is centred on the concept of control [and] the existence of a concentration is to a great extent determined by qualitative rather than quantitative criteria’ (para 7).

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A distinction is made between concentrations resulting from a merger and those from acquisition of control. The former occurs when a new undertaking is created from the amalgamation of two or more undertakings that cease to exist as separate legal entities, or from the absorption of one undertaking by another that will retain its legal identity. Examples of such concentrations can be found in cases COMP/M.1673 VEBA/VIAG ([2001] OJ L188/1), COMP/M.1806 AstraZeneca/Novartis ([2004] OJ L110/1), COMP/M.2208 Chevron/ Texaco ([2001] OJ C128/2) and COMP/M.3294 ExxonMobil/BEB ([2004] OJ C8/7). In the case of the latter, control is acquired by one undertaking acting alone or by several undertakings acting jointly. Under Article 3(1)(b) of the 2004 Merger Regulation, a concentration may be a legal or a de facto operation in the form of sole or joint control, and extend to the whole or parts of one or more undertakings. Control is defined in Article 3(2) of the 2004 Merger Regulation as the ‘possibility of exercising decisive influence on an undertaking’ on the basis of ‘rights, contracts or any other means …, either separately or in combination …’. Such influence need not be actually exercised but the possibility of such influence must be effective (Case T-282/02 Cementbouw Handel & Industrie BV v Commission [2006] ECR II-319, para 58). A third category of concentration is covered by Article 3(4) of the 2004 Merger Regulation, namely ‘the creation of a joint venture performing on a lasting basis all the functions of an autonomous economic entity’, known as a full-function joint venture. The question arose in Case C-248/16 Austria Asphalt GmbH & Co OG v Bundeskartellanwalt EU:C:2017:643 as to whether a joint venture resulting from switching existing undertakings from sole control by one company to joint control by two companies would be covered by Article 3(4). As noted by Advocate General Kokott, the preamble to the Merger Regulation does not draw any distinction between such joint venture and newly created ones (see Opinion EU:C:2017:322, para 28). Therefore, following a teleological approach (as opposed to the textual one espoused by the Commission) (para 20), the Court ruled that, since ‘Article 3 of the regulation … concerns joint ventures only in so far as their creation provokes a lasting effect on the structure of the market’ (para 25) and that ‘[s]uch an interpretation is supported by Article 3(1)(b) of the regulation which takes as the constituent element of the concept of concentration not the creation of an undertaking but a change in the control of an undertaking’ (para 26) (emphases added), Article 3(4) refers to the creation of a joint venture, whereby an undertaking controlled jointly by at least two other undertakings emerges in the market, irrespective of the fact that that undertaking, now jointly controlled, existed before the creation of the joint venture (para 28). Whether they are created ex nihilo or from a pre-existing undertaking, all joint ventures must fulfil the same condition: to be fully functioning autonomous entities (see para 35). Full functionality means that the entity enjoys operational autonomy. This does not require, however, that the entity has autonomy with regard to the adoption of strategic decisions (see Cementbouw, para 62). In order for it to have full functionality, a joint venture must ‘operate on a market, performing the functions normally carried out by undertakings operating on the same market’ (Commission Notice, para 94). This implies the management of its day-to-day operations and access to sufficient resources to be able to conduct long-term activities assigned to it in the joint-venture agreement. Thus, taking over one specific function within the parent companies’ activities without having access to, or a presence of its own on, the market will not be sufficient to make it a full-function joint venture.

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Furthermore, the joint venture must be able to operate on a lasting basis. This will usually be demonstrated by the resources committed by the parent companies to the joint venture. By contrast, a joint venture established for a short period of time will not satisfy this criterion and will not be covered by Article 3(4) of the Merger Regulation. This will be the case where the joint venture is created for the sole purpose of dealing with a specific project without involving it in the management and operation of the object of that project once completed. However, where a joint venture covered by Article 3(4) of the Regulation ‘has as its object or effect the coordination of the competitive behaviour of undertakings that remain independent’, Article 2(4) provides that the compatibility with the internal market of such coordination is to be assessed under Article 101(1) and (3) TFEU.

17.4.2 The Union dimension of concentrations Not all concentrations fall within the scope of application of the 2004 EC Merger Regulation. Only those that satisfy a very specific criterion, namely those with a Union dimension, will. This is an important criterion as it delineates the jurisdiction between the European Commission and national competition authorities. According to its Article 1(1), the 2004 Merger Regulation shall apply to all concentrations with a [Union] dimension as defined in this Article. This is the second limb of a twofold test to determine whether the Merger Regulation applies to an operation or not. Once the operation is identified as a concentration in accordance with Article 3 of the 2004 Merger Regulation, it will be necessary to assess whether it has an impact upon the Union and then be deemed to be with a ‘Union dimension’. Article 1 provides two sets of turnover thresholds to establish whether a concentration has a Union dimension or not. Under Article 1(2), a concentration will have such dimension if: • the combined aggregate worldwide turnover of all undertakings exceeds EUR 5,000 million; and • the aggregate Union-wide turnover of at least two of the undertakings exceeds EUR 250 million, unless each of the companies achieves more than two-thirds of its aggregate Unionwide turnover in one and the same Member State. The first criterion aims to measure the overall dimension of the companies involved in the concentration; the second one is intended to determine whether the concentration involves a minimum level of activities within the Union; and the purpose of the third one is to distinguish purely domestic operations from Union ones. Should a concentration fall short of meeting those criteria to achieve Union dimension under Article 1(2) and yet, should it still have a substantial impact in at least three Member States, Article 1(3) provides for another set of lower world- and Unionwide turnover thresholds. Those are: • the combined aggregate worldwide turnover of all undertakings exceeds EUR 2,500 million; • in each of at least three Member States, the combined aggregate turnover exceeds EUR 100 million;

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•

in each of at least three Member States, the turnover of at least two undertakings exceeds EUR 25 million; and • the aggregate Union-wide turnover of each of at least two of the undertakings exceeds EUR 100 million, unless each of them achieves more than two-thirds of its aggregate Union-wide turnover in one and the same Member State. As the Commission Notice explains, those thresholds, based on turnover calculation rather than market shares, are ‘purely quantitative’ and are only designed to provide a simple mechanism to enable companies involved in a concentration operation to determine whether it has a Union dimension and, consequently, whether it is notifiable to the European Commission or not. The sole purpose of Article 1 is to determine jurisdiction, not to explain how aggregate turnovers should be calculated in a way that they accurately reflect economic reality. This point is explained in great detail in Article 5 of the 2004 Merger Regulation.

17.4.3 Appraisal of concentrations The appraisal of concentrations is designed to establish whether or not they are compatible with the internal market. Such appraisal will be done on the basis of the necessity of ensuring effective competition within the internal market and the market position of the undertakings involved in the concentration operation, notably taking account of their economic and financial power, legal or other barriers to entry, the supply and demand trends for the relevant goods or services, the interests of intermediate and final consumers, and the development of technical and economic progress. Article 2(2) of the 2004 Merger Regulation describes in general terms the conditions under which a concentration is compatible with EU law, namely: A concentration which would not significantly impede effective competition in the [internal] market or in a substantial part of it, in particular as a result of the creation or strengthening of a dominant position, shall be declared compatible with the [internal] market. (emphasis added) This should be contrasted with Article 2(2) of the 1989 Merger Regulation which provided that [a] concentration which does not create or strengthen a dominant position as a result of which effective competition would be significantly impeded in the common market or in a substantial part of it shall be declared compatible with the common market. The 1989 provision put the emphasis on the existence or the strengthening of a dominant position. By contrast, the 2004 version gives preference to the effect on competition and applies the significant impediment of effective competition (SIEC) economic criterion, which is close to the American substantial lessening of competition criterion. This wide-meaning phrase gives the European Commission wide discretion when taking into consideration the ‘need to maintain and develop effective competition’ and the ‘market position of the undertakings concerned’ (Article 2(1)(a) and (b) of the 2004 Merger Regulation). It is clear from the Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of concentrations between undertakings that, for

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the Commission, the need to maintain effective competition is paramount. As stated in paragraph 8 of the Guidelines: Effective competition brings benefits to consumers, such as low prices, high quality products, a wide selection of goods and services, and innovation. Through its control of mergers, the Commission prevents mergers that would be likely to deprive customers of these benefits by significantly increasing the market power of firms. As explained in paragraph 10 of the Guidelines, the Commission’s assessment of mergers will normally entail a definition of the relevant product and geographic markets and a competitive assessment of the merger. The Commission will notably base this assessment on: • an analysis of market shares held by the undertakings involved in the concentration and the concentration thresholds; • the potential anti-competitive effects in the relevant markets of the merger in the absence of countervailing factors; • the existence of countervailing factors such as buyer power, efficiencies brought about by a merger and likelihood of market entry; and • whether one of the merging parties is a failing firm, thus rendering a problematic merger compatible with the internal market. (Guidelines, para 11) Nonetheless, if the Commission is given wide discretion by the 2004 Merger Regulation in its assessment of compatibility of mergers with the internal market, the Court became increasingly critical of the Commission’s economic analysis of the effects of concentration within the internal market, and has required the Commission to provide more accurate, reliable and coherent supporting evidence. Cases such as Case T-342/299 Airtours plc v Commission [2002] ECR II-2585, Case T-310/01 Schneider Electric SA v Commission [2002] ECR II-4071, Case T-80/02 Tetra Laval BV v Commission [2002] ECR II-4519 and Case C-12/03 P Commission v Tetra Laval BV [2005] ECR I-987 provide a clear illustration of the more stringent review exercised by the Court over Commission decisions declaring a concentration to be incompatible with the internal market, thus forcing the Commission to improve dramatically its decision-making process. In the absence of a sufficiently and accurately substantiated analysis, the Court will not hesitate to annul the Commission’s decisions. With the exception of certain controversial decisions declaring a concentration incompatible with EU competition rules, such as in Case IV/M53 Aerospatiale-Alenia/ de Havilland ([1991] OJ L334/42), the majority of the Commission decisions have been decisions declaring a concentration compatible. This is notably the result of a direct dialogue and negotiation process between the Commission Merger task force and companies regarding commitments (usually in the form of relinquishment of business activities to third companies) and corrective measures that the latter must make in order to secure a Commission decision of compatibility (see Commission notice on remedies acceptable under Council Regulation (EC) No 139/2004 and under Commission Regulation (EC) No 802/2004 ([2008] OJ C267/01)). Examples of such decisions can be found in the following cases: • IV/M.877 Boeing/McDonnell Douglas ([1997] OJ L336/16): Boeing had to renounce exclusive supply agreements;

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•

•

•

•

•

• •

•

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COMP/M.1628 TotalFina/Elf ([2001] OJ L143/1): as a condition for acquiring Elf Aquitaine, TotalFina had to sell 70 service stations on the French motorway network; COMP/M.2016 France Télécom/Orange ([2000] OJ C261/07): the acquisition by France Télécom of Orange was conditional on the obligation to sell its shares in a Belgian mobile phone company; COMP/M.3225 Alcan/Pechiney (II) ([2003] OJ C299/19): acquisition of French aluminium producer Pechiney by Alcan of Canada after Alcan offered to divest a number of businesses; COMP/M.5440 Lufthansa/Austrian Airlines ([2010] OJ C16/10): acquisition of Austrian Airlines by Deutsche Lufthansa AG of Germany conditional upon the implementation of a set of remedies offered by Lufthansa addressing competition concerns on routes Vienna–Frankfurt, Vienna–Munich, Vienna–Stuttgart, Vienna–Cologne and Vienna–Brussels; COMP/M.6314 – Telefónica UK / Vodafone UK / Everything Everywhere / JV (C(2012) 6063 final): unconditional approval of the creation of a joint venture between Vodafone, Telefónica and Everything Everywhere in the field of mobile commerce in the UK; COMP/M.7429 — Siemens/Dresser-Rand (C(2015) 4355 final): approved acquisition of rotating equipment manufacturer Dresser-Rand by Siemens; M.8792 — T-Mobile NL/Tele2 NL (C(2018) 7768 final): approved acquisition of Tele2 NL by T-Mobile NL on the ground of no competition concerns in the EEA or any substantial part of it; and M.9779 Alstom/Bombardier Transportation (IP/20/1437 of 31 July 2020): approval of the acquisition of Bombardier Transportation by Alstom on condition of full compliance with a commitments package offered by Alstom.

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CONCENTRATION

UNION DIMENSION

APPRAISAL Substantive test

Merger (Article 3(1)(a) of the 2004 Merger Regulation) Acquisition of control (Article 3(1)(b) of the 2004 Merger Regulation) Full-function joint venture (Article 3(4) of the 2004 Merger Regulation)

First test (Article 1(2) of the 2004 Merger Regulation): combined aggregate worldwide turnover of over EUR 5,000 m and aggregate EU wide turnover of at least 2 of the undertakings is over EUR 250 m; unless each of the companies achieves more than two-thirds of its aggregate Union-wide turnover in one and same Member State Second test (Article 1(3) of the 2004 Merger Regulation): combined aggregate worldwide turnover of over EUR 2500 m; or combined aggregate turnover of over EUR 100 m in each of at least 3 Member States; or aggregate turnover of each of at least 2 of the undertakings concerned is more than EUR 25 m in each of at least 3 Member States; or aggregate EU-wide turnover of each of at least 2 of the undertakings is over EUR 100 m; unless each of the companies achieves more than two-thirds of its aggregate Union-wide turnover in one and same Member State

concentration which would significantly impede effective competition (SIEC) in the internal market or in a substantial part of it in particular as a result of the creation or strengthening of a dominant position

Figure 17.8 Control of concentrations

17.5 Further Reading Article 101 TFEU Bailey D, ‘Overall, Single Agreement in EU Competition Law’ (2010) 47 CML Rev 473. Bailey D, ‘Restriction of Competition by Object’ (2012) 49 CML Rev 559. Coumes J-M and Wilson K, ‘New Rules on Supply and Distribution Agreements: Main Changes of the New System’ (2010) 31(11) ECLR 439. De Stefano G, ‘The New EU “Vertical Restraints Regulation”: Navigating the Vast Sea Beyond’ (2010) 31(12) ECLR 487. Ibanez Colomo P, ‘Intel and Article 102 TFEU Case Law: Making Sense of a Perpetual Controversy’, LSE Working Paper Series 29-2014, December 2014.

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Joshua J, ‘Single Continuous Infringement of Article 81 EC: Has the Commission Stretched the Concept beyond the Limit of its Logic?’ (2009) 5(2) European Competition Journal 451. Loozen E, ‘Case Comment. The Workings of Article 101 TFEU in Case of an Agreement that Aims to Limit Parallel Trade (GlaxoSmithKline Services (C-501/06 P, C-513/06 P, C-515/06 P and C-519/06 P))’ (2010) 31(9) ECLR 349. Monti G, ‘The New Substantive Test in the EC Merger Regulation – Bridging the Gap Between Economics and Law?’, LSE Working Paper Series 10-2008, August 2008. Nagy CI, ‘The New Concept of Anti-competitive Object: a Loose Cannon in EU Competition Law’ (2015) 36(4) ECLR 154. Ortega González A, ‘Case Comment. Restrictions by Object and the Appreciability Test: the Expedia Case, a Surprising Judgment or a Simple Clarification?’ (2013) 34(9) ECLR 457. Whish R and Bailey D, ‘Regulation 330/2010: The Commission’s New Bock Exemption for Vertical Agreements’ (2010) 47 CML Rev 1747. Article 102 TFEU Akman P, ‘Searching for the Long-Lost Soul of Article 82EC’ (2009) 29(2) Oxford Journal of Legal Studies 267. Albors-Llorens A, ‘The Role of Objective Justification and Efficiencies in the Application of Article 82 EC’ (2007) 44 CML Rev 1727. Borlini L, ‘Methodological Issues of the “More Economic Approach” to Unilateral Exclusionary Conduct. Proposal of Analysis Starting from the Treatment of Retroactive Rebates’ (2009) 5(2) Competition Law Review 409. Geradin D, ‘Loyalty Rebates After Intel – Time for the European Court of Justice to Overrule Hoffman-La Roche’ (2015) 11(3) Journal of Competition Law & Economics 579. Gormsen L, ‘Article 82 EC: Where Are we Coming from and Where Are we Going to?’ (2005) 2(2) Competition Law Review 5. Gormsen L, ‘The Conflict between Economic Freedom and Consumer Welfare in the Modernisation of Article 82 EC’ (2007) 3(2) Competition Law Review 329. Gravengaard MA and Kjaersgaard N, ‘The EU Commission Guidance on Exclusionary Abuse of Dominance - and its Consequences in Practice’ (2010) 31(7) ECLR 285. Lang JT, ‘Comparing Microsoft and Google: The Concept of Exclusionary Abuse’ (2016) 39(1) World Competition 5. Nihoul P, ‘The Ruling of the General Court in Intel: Towards the End of an Effectbased Approach in European Competition Law?’ (2014) 5(8) Journal of European Competition Law & Practice 521. Özkan AF, ‘The Intel Judgment: The Commission Threw the First Stone but the EU Courts will Throw the Last’ (2015) 11(1) European Competition Journal 69. Rokita K, ‘Exclusionary Rebates: Where Are We after Post Danmark II and How Did We Get There?’ (2016) 41(6) EL Rev 885. Szyszczak E, ‘Controlling Dominance in European Markets’ (2010) 33 Fordham International Law Journal 1738. Verhaert J, ‘The Challenges Involved with the Application of Article 102 TFEU to the New Economy: A Case Study of Google’ (2014) 35(6) ECLR 265. Wills W, ‘The Judgment of the EU General Court in Intel and the So-Called More Economic Approach to Abuse of Dominance’ (2014) 37(4) World Competition 405. Witt A, ‘The Commission’s Guidance Paper on Abusive Exclusionary Conduct – More Radical than it Appears?’ (2010) 35(2) EL Rev 214.

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Control of concentrations Doleys T, ‘Incomplete Contracting, Commission Discretion and the Origins of EU Merger Control’ (2009) 47(3) Journal of Common Market Studies 483. Kratsas G, ‘Structural or not? A Critical Analysis of the Commission’s New Notice on Remedies’ (2008–2009) 15 Columbia Journal of European Law 549. Moeschel W, ‘European Merger Control’ (2013) 34(6) ECLR 283. Weitbrecht A, ‘Mergers in an Economic Crisis - EU Merger Control 2008/2009’ (2010) 31(7) ECLR 276. Witt A, ‘From Airtours to Ryanair: Is the More Economic Approach to EU Merger Law Really About More Economics?’ (2012) 49 CML Rev 217. Summary

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The framers of the original Treaty of Rome understood very well that an internal market without competition rules would never be an effective market. For this reason, companies may not engage into behaviour that may distort or restrict competition. The Treaty rules on competition prohibit two specific anti-competitive behaviours: collusion between undertakings in the form of restrictive agreements or concerted practices (Article 101 TFEU) and unilateral conduct in the form of abuse of a dominant position (Article 102 TFEU). While the latter is strictly prohibited, the former may be exempted from prohibition if it satisfies specific conditions set out in the third paragraph of Article 101 TFEU. Both provisions seek to achieve, in different ways, the same aim of maintaining effective competition within the internal market and operate only in so far as the behaviour concerned affects trade between the Member States. It is to be noted also that the wording of Articles 101 and 102 have remained untouched since the adoption of the Treaty of Rome in 1957. Concentration, in the form of merger or acquisition of companies, is another type of behaviour which, per se, is not necessarily viewed as anti-competitive, yet may have a significant impact on competition and the internal market. As they are not covered by Treaty provisions, concentrations were originally dealt with primarily under the concept of collective dominant position. It was not until 1989 that an effective regime of control of concentrations was set up under Regulation 4064/1989, later amended by Regulation 139/2004 (Merger Regulations). Unlike Articles 101 and 102 which establish a system of a posteriori enforcement of competition rules, the Merger Regulations set up a preventive control.

Test Your Knowledge

1

Robotica SpA, an Italian company, has developed a voice-activated word processor which was patented under the name ‘VOX’. Owing to its lack of marketing experience, Robotica enters into an agreement with Omega SA, a French company, whereby Omega must use its best efforts to market the processor in France. The agreement notably provides that Omega will be the only distributor of VOX in France, will not sell VOX to distributors in other Member States and will register the ‘VOX’ trade mark in France. Alpha SaRL has complained that it is unable to stock the VOX processors and that the agreement between Robotica and Omega is unlawful under Article 101 TFEU. Discuss.

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‘[B]ecause both the agreement and the concerted practice fall within Article 101, there may be little point distinguishing between them. However, it remains crucial to differentiate collusion, whether agreement or concerted practice, from mere parallel behaviour, for the latter remains perfectly lawful.’ (per S Weatherill, Cases & Materials on EU Law, 12th edn (Oxford University Press, 2016) at 462) Discuss how the distinction between collusion and parallel behaviour has been drawn by the EU authorities.

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Pfuezer SA, a French firm, Pharmacom Plc, a UK-based firm, Pharmatica SpA, an Italian firm, and Advent Inc, an American firm, are the four major producers of anti-tuberculosis drugs in the world. Their respective shares of the world market are 39%, 23%, 18% and 12%. Three other firms produce the remaining 8%. Since 2016, the prices of the four companies have never diverged by more than 5% and their respective market shares have been constant throughout this period. In 2018 and 2020, the price of aminobutanol, the raw material necessary to make those drugs, increased considerably, and all four firms’ prices went up simultaneously by an equal amount. Pfuezer put its prices up before the other three major firms. However, those followed the lead of Pfuezer within a matter of days. All four firms belong to the International Association of Pharmaceutical Producers (IAPP), to which they send details of their prices, production and sales on a quarterly basis. The Association collates this information and sends it to its members at regular intervals. Discuss the liability of the parties under Article 101 TFEU.

4

Explain the de minimis doctrine and how it has developed in its application since its original formulation.

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TG SA has developed a fruit called peap, a cross between a peach and an apricot. It is extremely popular in shops and supermarkets. Other rivals also produce peap, but TG still retains 48% share of the total peap market in the EU, although only 5% of the total market of fresh fruit. TG supplies peap to shops which agree to sell only peap and no other soft fruit. It also insists on charging retailers 75 cents per peap (production and cultivation costs amount to only 5 cents per fruit). Gerhard Merkel, a small grocer, wishes to stock peap. However, TG refuses to supply him because he would not agree to comply with TG’s conditions. Advise Gerhard Merkel on his position and TG SA on its practices.

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Billard SA is a French company which manufactures billiard tables and cues, primarily for export to Germany where it has 40% of the market for billiard tables and 65% of the market for cues. In January 2020, three of its former employees moved to Germany and set up a small company, Q GmbH, to manufacture and sell top quality cues. By March 2020, Q had captured a 15% share of the German market and its customers include top professional players. Concerned about the erosion of its market share, Billard SA cuts the price of its cues in Germany by 20%. This results in Q seeing its own share of the market falling to 8% within just five weeks. At this level, it will be difficult for Q to survive for long. Q decides to take urgent action.

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Q complains to the German Competition Authority about the behaviour of Billard, alleging that Billard is guilty of breaching Article 102 TFEU. The complaint specifically states that Billard is selling its cues in Germany below the prices at which it could make a profit. Advise Q GmbH whether or not there is a prima facie breach of Article 102 TFEU considering all the elements of this Article.

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After reading this chapter, you will be able to understand: • the territoriality principle • the public enforcement mechanism • the private enforcement of competition rules and damages action.

18.1 Introduction There are multiple enforcers of EU competition rules: the European Commission, under the supervision of the Court of Justice, and national competition authorities and courts. Regulation 17/62 (OJ English special edition: Series I Chapter 1959-1962 at 87), the first Regulation implementing former Articles 85 and 86 TEEC (Regulation 17), set up the original highly centralised system of supervision and enforcement of competition rules. In this system, the European Commission, national courts and national competition authorities (NCAs) could all apply former Articles 85(1) and 86 TEEC (now Articles 101(1) and 102 TFEU), but the Commission alone was vested with the exclusive power to grant exemptions under former Article 85(3) TEEC (now Article 101(3) TFEU). Regulation 1/2003/EC on the implementation of the rules laid down under Articles 81 and 82 EC ([2003] OJ L1/1) brought about the first landmark reform in the development of European competition law to enable the enforcement system to cope with the challenges of further enlargement and the creation of an economic and monetary union. It not only extended the powers of national competition authorities and national courts to apply all EU competition rules, but also established new forms of cooperation between the Commission and NCAs within the framework of a European Competition Network (ECN). If public enforcement of competition law is a major tool to deter anti-competitive practices and to protect businesses and consumers from such practices, private enforcement is also regarded as an important part of a common enforcement system serving the same aims of maintaining a competitive economy. Compared to public enforcement, private enforcement was, however, in a state of complete underdevelopment. This imbalance was corrected by the second landmark reform in the history of EU competition law with the adoption of Directive 2014/104/EU on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union ([2014] OJ L349/1). Another important aspect of the EU’s jurisdiction is the extent to which Articles 101 and 102 TFEU apply to firms that are incorporated outside the European Union. This controversial issue in turn raises questions of enforcement.

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18.2 The territoriality principle in EU competition law According to the principle of territoriality, wrongly referred to as the extraterritoriality principle, EU competition rules apply to agreements, abuse of dominant position and concentrations which may distort competition within the internal market even if they involve, partially or fully, undertakings which are registered outside the European Union. It is clear that an agreement between an EU firm and a non-EU firm to limit imports into the internal market is caught by Article 101 TFEU, as is an agreement between two EU firms to restrict exports from the internal market, at least if the effect is to change trade patterns (as in Joined Cases 40 to 48, 50, 54 to 56, 111, 113 and 114/73 Coöperatieve Vereniging ‘Suiker Unie’ UA and others v Commission [1975] ECR 1663). This was the case, for instance, in Franco-Japanese ball-bearings agreement (Commission Decision 74/634/EEC ([1974] OJ L343/19)), in which major French and Japanese ballbearing manufacturers entered into a written agreement to increase the prices of Japanese ballbearings imported into France so as to make them level with the prices of bearings manufactured in France. Generally, the EU authorities have not been diffident about applying Article 101 to non-EU firms. They are treated as being subject to the law either because their behaviour is within the European Union’s territory or because they have a subsidiary company within the Union’s territory. In Case 48/69 Imperial Chemical Industries Ltd v Commission (Re Dyestuffs) [1972] ECR 619, the ECJ decided that three non-EU undertakings had participated in an illegal price-fixing scheme within the internal market through subsidiary companies located there and under their control. In reality, each parent and subsidiary formed one economic entity and, therefore, Imperial Chemical Industries Ltd … was able to exercise decisive influence over the policy of the subsidiaries as regards selling prices in the Common Market and in fact used this power upon the occasion of the three price increases in question. (para 137)

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ca ple In Wood Pulp Cartel (Commission Decision 85/202/EEC ([1985] OJ L85/1)), the xam e Commission found that 43 non-EU wood pulp manufacturers had through a concerted practice imposed resale and export bans. They were found liable on the basis of the effect of the conduct on the then EC market (see 17.2.2.1). On appeal to the Court (Joined Cases 89, 104, 114, 116, 117 and 125 to 129/85 A Ahlström Osakeyhtiö and others v Commission (Re Wood Pulp Cartel) [1988] ECR 5193, decided initially only on the question of jurisdiction, it was held that ... [i]f the applicability of prohibitions laid down under competition law were made to depend on the place where the agreement, decision or concerted practice 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. The producers in this case implemented their pricing agreement within the [internal] market. It is immaterial in that respect whether or not they had recourse to subsidiaries, agents, sub-agents, or branches within the [Union] in order to make their contacts with purchasers within the [Union]. (paras 16–17) As the Court put it, the decisive factor in applying competition rules is therefore the place of implementation of the restrictive agreement, not its place of formation. (See also Case T-286/09 Intel Corp v Commission EU:T:2014:547, para 232; see 17.3.3.2.)

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By contrast, in Zinc Producer Group (Commission Decision 84/405/EEC ([1984] OJ L220/27)) – which was not referred to by the Court in the Wood Pulp Cartel case – liability was founded on the presence of a subsidiary in the then Community’s territory. The Vitamins Cartel case (Commission Decision 2003/2/EC ([2003] OJ L6/1) and Cases T-22/02 and T-23/02 Sumitomo Chemical Co Ltd and Sumika Fine Chemicals Co Ltd v Commission [2005] ECR II-4065), which involved price-fixing on the market of vitamin products by 15 European and non-European pharmaceutical companies, is another good example of the application of the territoriality principle in EU competition law. The Commission also found the American company Continental Can guilty of abuse of a dominant position (see Case 6/72 Europemballage Corporation and Continental Can Company Inc v Commission [1973] ECR 215). In this case, the Court stated that [t]he circumstance that Continental does not have its registered office within the territory of one of the Member States is not sufficient to exclude it from the application of [Union] law. (para 16) Article 102 also applied to the US-based company Microsoft, which was found to be guilty of abuse of its dominant position on the markets of client PC operating systems and of work group server operating systems (see Microsoft COMP/C-3/37.792 (C(2004)900 final) and Case T-201/04 Microsoft Corp v Commission [2007] ECR II3601). With regard to concentrations (mergers and acquisitions), cases such as Case COMP/M.2220 General Electric/Honeywell ([2004] OJ L48/1) prohibiting the acquisition of Honeywell by General Electric and Case IV/M.877 Boeing/McDonnell Douglas ([1997] OJ 1997 L336/16) demonstrate that EU rules on concentrations can apply to mergers involving American companies. In the latter case, Boeing even accepted the negotiation with the European Commission of corrective measures necessary to secure a decision of compatibility of the merger with EU rules. As the Court put it in the Wood Pulp Cartel case, the EU’s jurisdiction to apply its competition rules to such anti-competitive conduct on the part of non-EU based companies … is covered by the territoriality principle as universally recognized in public international law. (para 18) Further, the Commission and the Court espoused the so-called ‘effects doctrine’ from US antitrust law. This second (alternative and not cumulative; see Intel, para 236) approach based on the qualified effects of the practices in the European Union was followed in Case T-102/96 Gencor v Commission [1999] ECR II 753. In para 90 of that judgment, the Court held that the application of Council Regulation (EEC) 4064/89 on the control of concentrations between undertakings was justified under public international law when it was foreseeable that a proposed concentration would have an immediate and substantial effect in the European Union. Both approaches were used in Intel (see 17.3.3.2), in which the General Court observed that the Commission had jurisdiction to punish Intel’s conduct. This jurisdiction could be established on the basis of the effects of its anti-competitive conduct in the European Union, as Intel’s conduct was indeed capable of having a substantial, immediate and foreseeable effect within the European Economic Area (paras 250–296), and the implementation of the conduct (paras 298–314), the latter

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having been examined ‘for the sake of completeness’ (para 297). Intel’s arguments regarding the Commission’s lack of territorial jurisdiction to penalise the abuse were also rejected on appeal by the Court of Justice (Case C-413/17 Intel Corp v Commission EU:C:2017:632, paras 32–65). This principle suffers serious limits however. If the Commission has the power to notify non-EU companies of its intention to start infringement proceedings against them, request information from them or even impose penalties on them, it has no powers of enforcement. This is the reason why it has been necessary for the European Commission to engage in cooperation with competition authorities of third countries, either by way of: • bilateral international cooperation agreements on competition, known as ‘dedicated agreements’: United States of America (1995 and 1998), Canada (1999), Japan (2003), Korea (2009) and Switzerland (2014); • memoranda of Understanding on Cooperation, such as those with Brazil (2009), China (2012), India (2013) and Russia (2011); or • specific competition provisions as part of: – the EEA Agreement: Iceland and Norway (1994); – Stabilisation and Association Agreements: FYROM (2004), Albania (2006), Montenegro (2007) and Bosnia and Herzegovina (2008); – Free Trade Agreements: South Korea (2010), Columbia and Peru (2011), Singapore (1914) and Vietnam (2015); – Agreements on Trade, Development and Cooperation: South Africa (1999); – Partnership and Cooperation Agreements: Russia (1997), Mexico (1997), Moldova and Ukraine (1998), Armenia, Azerbaijan and Georgia (1999), ACP countries (2000 Cotonou agreement), and Caribbean Community (CARIFORUM) (2008); and – Association Agreements: Turkey (1995), West Bank and the Gaza Strip (1997), Tunisia (1998), Morocco (2000), Chile (2002), Egypt (2004), Algeria and Israel (2005) and Lebanon (2006). The need for further international cooperation has also driven the EU and third countries to set up in 2001 an International Competition Network which brings together more than 132 national competition authorities. Its purpose is to facilitate substantial and procedural convergence of national competition rules.

18.3 Public enforcement of competition rules 18.3.1 The modernisation of European competition law Though it was necessary in the 1960s, 1970s and 1980s, the centralised system of competition regulation and enforcement designed for an original European Community of six Member States, 170 million inhabitants, working in four different languages, was no longer appropriate at the turn of this century for a Community of 15 Member States, 11 languages and over 380 million inhabitants, heading for its ever biggest enlargement in 2004. At that time, the European competition policy was facing three major challenges: • the enlargement of the then European Community to the countries of Central and Eastern Europe, Malta and Cyprus;

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the creation of an economic and monetary union entailing further economic integration; and • the increasing internationalisation of the European economy. ‘In a European Union with more than 20 Member States, the rules for implementing Articles [101] and [102] [had to] be modernised if competition policy [was] to continue to operate efficiently.’ This was the diagnosis made by the Commission in its White Paper on the modernisation of the rules implementing Articles 85 and 86 of the EC Treaty ([1999] OJ C132/1) (para 7). The need for reform of the EC competition legal framework was inevitable indeed. To carry out this reform most effectively, the Commission focused its efforts on two main objectives: • the decentralisation of the enforcement of competition rules, thus empowering NCAs and national courts to apply the then EC antitrust rules in their entirety, with the effect of creating multiple enforcers and ensuring their wider application; and • the abolition of the Commission’s monopoly in the notification and exemption systems for business agreements by making the criteria of former Article 85(3) TEEC (now Article 101(3) TFEU) on individual exemptions (see 17.2.4) directly applicable by national courts and NCAs without prior decision of the Commission. This would enable the Commission to focus its resources on the fight against major cartels and other serious violations of antitrust rules.

18.3.2 The enforcement of Articles 101 and 102 TFEU The modernisation and decentralisation of the enforcement of European competition rules was achieved with the adoption of Regulation 1/2003/EC. By replacing Regulation 17, it laid down a new system of supervision and enforcement procedures. It is supplemented by Regulation 773/2004 relating to the conduct of proceedings by the Commission pursuant to Articles 81 and 82 of the EC Treaty ([2004] OJ L123/18) as amended by Regulation 622/2008 on the conduct of settlement procedures in cartel cases ([2008] OJ L171/3). The abolition of the prior notification procedure under Regulation 1/2003 means that an agreement is presumed compatible with competition rules unless the Commission or NCAs prove otherwise. However, it falls on the undertakings claiming the benefit of Article 101(3) TFEU to prove that their agreement fulfils the conditions of that provision (Article 2 of Regulation 1/2003). Under this new regime, it is for the undertakings to assess the compatibility of their behaviour with competition rules. Such self-assessment can be quite complex and can only be based on Commission decisions, notices and guidelines as well as the case law of the Court. However, the possibility of requesting negative clearance from the Commission available under Regulation 17 in order to guarantee the non-application of Articles 101 and 102 TFEU has not been abolished but made optional for companies seeking greater legal certainty. Furthermore, as a preventive measure, individual undertakings may request guidance letters from the Commission in the case of ‘novel or unresolved questions’ for the application of competition rules giving rise to genuine legal uncertainty (recital 38 of the preamble to Regulation 1/2003). The conditions under which informal guidance might be provided by the Commission are explained in the Notice on informal guidance relating to novel questions concerning Articles 81 and 82 of the EC Treaty that arise in individual cases (guidance letters) ([2004] OJ C101/78).

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18.3.2.1

The role of the Commission While abolishing the centralised notification system and putting an end to the Commission’s monopoly in the exemption procedure, Regulation 1/2003 also had the effect of strengthening the Commission’s powers, which is visible at both stages of investigation and in the final decision. Investigation by the Commission The entire supervision and enforcement procedure takes place in three stages: initiation of the investigation, the investigation process and the decision-making process. Initiation of the investigation According to Article 7(1) of Regulation 1/2003, the Commission can act on the basis of a complaint or on its own initiative. In the former case, the complaint may originate from natural or legal persons who ‘can show a legitimate interest’ (Article 7(2)). These can be the parties to an agreement itself (eg, distributors), the rivals of the parties to an agreement or third persons such as suppliers, customers or consumers’ associations (see Case T-37/92 Bureau Européen des Unions des Consommateurs and National Consumer Council v Commission [1994] ECR II-285). Member States may also lodge complaints with the Commission. In the latter case, the Commission will act on the basis of information collected by its services following informal complaints or given by national authorities. The Commission has full discretion to decide to take action if there is a legitimate Union interest (see Case T-77/95 Union française de l’express (Ufex), DHL International, Service CRIE and May Courier v Commission [2000] ECR II-2167, para 40 and Commission Notice on the handling of complaints by the Commission under Articles 81 and 82 of the EC Treaty ([2004] OJ C101/65), para 28). The Commission is expected, however, to … consider attentively all the matters of fact and law brought to its attention by complainants in order to decide whether they disclose conduct of such a kind as to distort competition in the [internal] market and affect trade between Member States … (Ufex, para 37) Furthermore, according to the settled case law of the Court (see Case T-24/90 Automec Srl v Commission [1992] ECR II-2223, para 86; Joined Cases T-189/95, T-39/ 96 and T-123/96 Service pour le groupement d’acquisitions (SGA) v Commission [1999] ECR II-3587, para 52; Joined Cases T-185/96, T-189/96 and T-190/96 Riviera Auto Service Etablissements Dalmasso SA, Garage des quatre vallées SA, Tosi, Palma SA (CIA - Groupe Palma) and Palma v Commission [1999] ECR II-93, para 46; and Case T-201/ 11 Si.mobil telekomunikacijske storitve d.d. v Commission EU:T:2014:1096, para 83), in its assessment of the Union interest, the Commission must … take account of the circumstances of the case, and must in particular balance the significance of the damage which the alleged infringement may cause to the functioning of the [internal] market against the probability of its being able to establish the existence of the infringement and the extent of the investigative measures required for it to perform, under the best possible conditions, its task of ensuring that Articles [101 and 102] of the Treaty are complied with … (Automec, para 86)

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The Commission’s discretion in defining priorities is therefore not unlimited and is reviewable by the Court. Not only are complainants ‘entitled to have the fate of their complaint settled by a decision of the Commission against which an action may be brought’ (Case C-282/95 P Guérin automobiles v Commission [1997] ECR I-1503, para 36 and Ufex, para 37), but also the Commission is notably obliged to give sufficiently precise and detailed reasons for its decision to decline to continue with the examination of a complaint (see Automec, para 80 and Ufex, para 42). This obligation is now formally incorporated in Article 7(1) of Regulation 773/2004: Where the Commission considers that on the basis of the information in its possession there are insufficient grounds for acting on a complaint, it shall inform the complainant of its reasons and set a time-limit within which the complainant may make known its views in writing. Powers of investigation Under Regulation 17, the Commission had three types of powers, namely: • to conduct inquiries into sectors of the economy (Article 12); • to request information (Article 11); and • to undertake all necessary investigations into undertakings and associations of undertakings (Article 14). Under Regulation 1/2003, the Commission keeps those powers and gain a new one, that of taking statements. Conduct of inquiries Under Article 17(1) of the Regulation, the Commission may conduct general inquiries into a particular sector of the economy if it has reasons to believe that competition may be restricted or distorted in that sector. For that purpose, it may request undertakings concerned to supply information, notably on all agreements, decisions and concerted practices in which they may be involved, and carry out all necessary inspections. The results of its inquiry may be published in a report and interested parties may be invited to comment upon them. Request for information Article 18(1) of the Regulation provides that … the Commission may, by simple request or by decision, require undertakings and associations of undertakings to provide all necessary information. In this case, the legal basis and the purpose of the request, the information required, the time limit within which the information is to be provided, and the penalties provided for in Articles 23 and 24 of the Regulation for supplying incorrect or misleading information, or for failing to supply information within the required time limit, must be specified. Power to take statements Article 19(1) of the Regulation gives the Commission the power to interview any natural or legal person with the view to collecting any information relating to the investigation provided they consent to be interviewed (on the conduct of proceedings, see Regulation 773/2004, Article 3). The competition authority of the Member State in whose territory the interview takes place must be informed by the Commission and, if it requests it, its officials may assist the Commission’s officials in conducting the interview (Regulation 1/2003, Article 19(2)). Powers of inspection Under Article 20(1) of the 2003 Regulation, the Commission has wide powers to conduct all necessary inspections of undertakings and associations

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of undertakings. Upon production of a written authorisation specifying the subject matter and purpose of the inspection and after giving notice of the inspection to the competition authority of the country where it is to be conducted (Article 20(3)), its officials may: • enter any premises, land and means of transport of the companies under investigation; and • examine their books and other records, take copies of those books or records and seal any business premises, books or records for the period necessary for the inspection. In the exercise of those powers, at their request, the Commission officials must be actively assisted by officials of the relevant national competition authority who will then enjoy the same powers (Article 20(5)). Undertakings must submit to inspections ordered by the decision of the Commission taken after consulting the relevant national competition authority (Article 20(4)). Such decision is challengeable in the Court of Justice however. In Case T-23/09 Conseil national de l’Ordre des pharmaciens (CNOP) and Conseil central de la section G de l’Ordre national des pharmaciens (CCG) v Commission [2010] ECR II5291, the applicants claimed (unsuccessfully though) that the contested decision did not clearly indicate whether the practices suspected by the Commission, which were the reason for the inspection, were alleged against the ONP alone, the CNOP alone, the CCG alone or against all them, thus making it impossible to ascertain the presumed facts which the Commission intended to investigate during the inspection. Indeed, the decision ordering an inspection must not only ‘state, as precisely as possible, the presumptions that [the Commission] wishes to investigate, namely what it is looking for and the matters to which the inspection must relate’ (see Case 85/87 Dow Benelux v Commission [1989] ECR 3137, para 10; Joined Cases 46/87 and 227/88 Hoechst v Commission [1989] ECR 2859, para 41; and Case C-94/00 Roquette Frères SA v Directeur général de la concurrence, de la consommation et de la répression des fraudes, and Commission [2002] ECR I-9011, para 48; Joined Cases T-289/11, T-290/11 and T521/11 Deutsche Bahn and Others v Commission EU:T:2013:404, para 170), but also the essential features of the suspected infringement by indicating the market thought to be affected, the nature of the suspected restrictions of competition and the supposed degree of involvement in the infringement of the undertaking concerned, as well as the powers conferred on the European Union investigators. (Case 136/79 National Panasonic v Commission [1980] ECR 2033, para 26; Roquette Frères, paras 81, 83 and 99; Deutsche Bahn, para 171 and T-325/16 České dráhy a.s. v Commission EU:T:2018:368, para 39) In the case where the undertaking under inspection opposes it, the Member State concerned must provide the Commission officials with the necessary assistance, including the assistance of the police or of any other enforcement authority (Article 20(6)), in which case authorisation from a national judicial authority is required (Article 20(7)). In such case, the jurisdiction of the national judicial authority is limited under Article 20(8) to ‘control that the Commission decision is authentic and that the coercive measures envisaged are neither arbitrary nor excessive’ (see Roquette Frères, para 40). To assess the proportionality of the coercive measures, the national judicial authority may ask the Commission ‘for detailed explanations’ but cannot ‘question the necessity for the inspection’ as the lawfulness of the Commission decision can only be challenged in the Court of Justice.

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Article 21(1) of the Regulation also authorises the Commission to conduct an inspection in other premises, land and means of transport, including the homes of directors, managers and other members of staff of the undertakings, if there is a reasonable suspicion that books or other records related to the business are kept in those premises. However, the Commission cannot proceed with such inspection ‘without prior authorisation from the national judicial authority of the Member State concerned’ (Article 21(3)). Hearings and professional secrecy The inquisitorial investigation is followed by the adversarial hearings stage of the procedure, which gives the undertakings under investigation the opportunity of being heard and during which their rights of defence are fully respected. This stage starts with the notification by the Commission to the parties concerned of a written statement of objections raised against them, to which the parties are invited to submit their written submission within a set time limit (Article 10 of Regulation 773/2004). After the notification of the statement of objections, those parties have a right of access to the files except to ‘business secrets, other confidential information and internal documents of the Commission or of the competition authorities of the Member States’ or any correspondence between the Commission and national competition authorities (Article 28 of Regulation 1/2003 and Article 15 of Regulation 773/2004). Under Article 14 of Regulation 773/2004, oral hearings of the parties concerned and third parties showing sufficient interest are then conducted by a Hearing Officer acting in full independence from the head of the Competition Directorate-General. The hearings are not public. Statements made by the parties during the hearings are recorded and must be made available to the parties who attended the hearings. Commission decisions Decision-making is the last stage of the investigation process. This takes place after the Commission has consulted an Advisory Committee on Restrictive Practices and Dominant Positions as required under Article 14 of the 2003 Regulation. The Commission may take two types of decisions: interim measures and final decisions. Interim measures Originally, Regulation 17 being silent on the matter, the power of the Commission to take interim measures was recognised in the case law of the Court (see Case 792/79 R Camera Care Ltd v Commission [1980] ECR 119, para 14; Joined Cases 228/82 and 229/ 82 R Ford Werke AG and Ford of Europe Incorporated v Commission [1982] ECR 3091, para 13 and Case T-44/90 La Cinq SA v Commission [1992] ECR II-1). In La Cinq, the Court ruled that interim measures were justified under two conditions: • practices of certain undertakings are prima facie such as to constitute a breach of EU rules on competition; and • there is ‘proven urgency, in order to prevent the occurrence of a situation likely to cause serious and irreparable damage to the party applying for their adoption or intolerable damage to the public interest’ (para 28). The Commission may take such measures in order to end an infringement of competition rules before adopting a final decision (see Joined Cases 228 and 229/82 Ford of Europe Incorporated and Ford-Werke Aktiengesellschaft v Commission [1984] ECR 1129).

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This power is now enshrined in Article 8(1) of Regulation 1/2003: In cases of urgency due to the risk of serious and irreparable damage to competition, the Commission, acting on its own initiative may by decision, on the basis of a prima facie finding of infringement, order interim measures. Final decisions The Commission may take a variety of decisions based on the nature and the extent of the infringement and EU law requirements. Finding and termination of infringement If the Commission finds that there is a breach of Articles 101 or 102 TFEU, Article 7(1) of Regulation 1/2003 empowers it to adopt a decision requiring the guilty undertakings to bring such infringement to an end, and imposing on them any behavioural or structural remedies in proportion to the infringement committed. Under Article 9(1), the Commission may also by decision make binding on the undertakings concerned their commitments to meet the concerns of the Commission. Finding of inapplicability At the end of its investigation, the Commission may also come to the conclusion that no infringement was committed and will then issue, under Article 10 of Regulation 1/2003, a decision finding that Article 101 or 102 TFEU is not applicable. Penalties Following the finding of an infringement, the Commission may impose two types of penalties on the undertakings concerned: fines and periodic penalty payments. Fines Based on the seriousness and the duration of the infringement (Article 23(3) of Regulation 1/2003), the Commission may impose two kinds of fines. Under Article 23(2), the Commission may impose a fine not exceeding 10% of its total turnover in the preceding business year on each undertaking which, either intentionally or negligently: • infringed Articles 101 or 102 TFEU; or • contravened a decision ordering interim measures; or • failed to comply with a commitment made binding by a decision under Article 9. Article 23(1) also empowers the Commission to impose fines of up to 1% of total turnover in the preceding business year on each undertaking for having, intentionally or negligently: • supplied incorrect, incomplete or misleading information following an Article 17 or 18 request for information (see above); or failed to supply information within the required time limit; • produced the required books or other records related to the business in incomplete form or refused to submit to inspections; • given, or failed to correct, an incorrect or misleading answer, failed or refused to provide a complete answer; or • broken seals affixed by the Commission. Periodic penalty payments Periodic penalty payments are designed to compel undertakings to: • put an end to an infringement of Articles 101 or 102 TFEU; • comply with interim measures;

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• comply with a commitment made binding by a decision under Article 9; • supply complete and correct information as requested; or • submit to an inspection. These payments cannot exceed 5% of the average daily turnover of the undertakings in the preceding business year per day. However, considering that the penalties imposed on undertakings may reach extremely high levels, the Commission developed since 1996 a general leniency programme. The latest one can be found in the Commission Notice on Immunity from fines and reduction of fines in cartel cases ([2006] OJ C298/17). Such programme is designed to ‘[reward] cooperation in the Commission investigation by undertakings which are or have been party to secret cartels affecting the [Union]’ (first recital). The reward might consist either in: • an immunity of fines for undertakings who are the first to provide information and evidence which will enable the Commission to carry out targeted inspections or find an infringement of Article 101 TFEU in connection with the alleged cartel; or • a reduction of the fine for undertakings which provide the Commission with evidence of the alleged infringement representing significant added value with respect to the evidence already in the Commission’s possession.

Initiation of the investigation Commission on its own initiative or on the basis of a complaint (Art. 7 R1/2003)

Investigation inquiries into sectors of the economy (Art. 12 R1/2003) request for information (Art. 11 R1/2003) taking of statements (Art. 19(1) R1/2003) inspection of premises, books and records (Art. 21 R1/2003) hearings (Art. 27 R1/2003 and Art. 14 R773/2004)

Decisions interim measures (Art. 8(1) R1/2003) commitments (Art. 9 R1/2003) final decisions: (a) finding and termination of infringement (Art. 7 R1/2003) (b) finding of inapplicability (Art. 10 R1/2003) penalties: (a) fines (Art. 23 R1/2003) (b) periodic penalty payments (Art. 24 R1/2003)

Figure 18.1 Investigating powers of the Commission

18.3.2.2

Cooperation between the Commission and national competition authorities and courts The distribution of powers between the European and national authorities with regard to Articles 101 and 102 TFEU has been fundamentally overhauled as a result of the modernisation and decentralisation of the enforcement system of EU competition rules. By introducing a system based on the direct effect of EU competition rules, Regulation 1/2003/EC empowered NCAs and national courts to apply all aspects of EU competition law. Thus, the Regulation offered two evolutions: a decentralised enforcement of EU competition rules in favour of NCAs (see the Commission Notice on cooperation within the Network of Competition Authorities ([2004] OJ C101/43)) and greater cooperation between the European Commission and national courts (see the

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Commission Notice on the co-operation between the Commission and the courts of the EU Member States in the application of Articles 81 and 82 EC ([2004] OJ C101/ 54)). Cooperation between the Commission and national competition authorities Under Article 11(1) of Regulation 1/2003, the Commission and NCAs must apply EU competition rules in close cooperation. Together, they form a European Competition Network (ECN). In this respect, Member States have an obligation to set up authorities responsible for the enforcement of competition rules. This obligation applied to all new Member States which joined the EU in 2004 and later (hence the coming into force of Regulation 1/2003 on 1 May 2004, the official day of that enlargement). In the United Kingdom, the relevant competition authority is the Competition and Markets Authority, which, from 1 April 2014, took over many of the functions of the Competition Commission (CC) and the Office of Fair Trading (OFT). Clearly specified under Article 5, first paragraph of the Regulation, the powers of NCAs are to ‘apply Articles [101] and [102] of the Treaty in individual cases’. For this purpose, acting on their own initiative or on a complaint, they are competent to: • require that an infringement be brought to an end; • order interim measures; • accept commitments made by undertakings; • impose fines, periodic penalty payments or any other penalty provided for in their national law; or • decide that there are no grounds for action. Cooperation between the Commission and NCAs has been solidly established and takes many forms: • first, they have the power to exchange information, including any evidence used in any matter of fact or of law and confidential information (Article 12(1)); • secondly, when acting under EU competition rules, NCAs must inform the Commission in writing before or without delay after commencing the first formal investigative measure, as well as the NCAs of other Member States (Article 11(3)). Conversely, the Commission also has an obligation, under Article 11(2), to transmit to NCAs copies of the most important documents it has collected in the course of an investigation and, at the request of a NCA, to provide it with a copy of other existing documents necessary for the assessment of the case; • more generally, NCAs may consult the Commission on any case involving the application of EU competition law (Article 11(5)), and have an obligation to assist Commission officials in the conduct of investigations (Article 22(2)); and • finally, under Article 13(1), the Commission may reject a complaint if a competition authority of a Member State is already dealing with the case (for a first interpretation of the conditions of application of this provision, see Si.mobil, paras 30–77). Nonetheless, the Commission retains an important regulatory role within the ECN. Under Article 11(6) of the Regulation, subject only to consultation of the national authority concerned, the Commission retains the option of initiating proceedings for the adoption of a decision, even where a national authority is already acting in the matter (see also Case T-339/04 France Télécom SA v Commission [2007] II-521, para 80). Furthermore, a NCA can never make a decision running counter to a Commission decision (Article 16(2)). Nor can it take a decision stating that there is no breach of

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Article 101 or 102 TFEU (negative decision) since the power of NCAs is limited to the adoption of a decision stating that there are no grounds for action (Article 5, second paragraph). Indeed, as the Court put it in Case C-375/09 Prezes Urzedu Ochrony Konkurencji i Konsumentów v Tele2 Polska sp z oo, devenue Netia SA [2011] ECR I3055: Empowerment of national competition authorities to take decisions stating that there has been no breach of Article 102 TFEU would call into question the system of cooperation established by the Regulation and would undermine the power of the Commission. Such a ‘negative’ decision on the merits would risk undermining the uniform application of Articles 101 TFEU and 102 TFEU, which is one of the objectives of the Regulation highlighted by recital 1 in its preamble, since such a decision might prevent the Commission from finding subsequently that the practice in question amounts to a breach of those provisions of European Union law. (paras 27–28) Cooperation between the Commission and national courts Regulation 1/2003/EC has formalised the relations between the Commission and national courts and has extended their powers to the application of Article 101(3) TFEU. The importance of the role of national courts in the application of EU competition rules is particularly stressed in the Notice on the handling of complaints by the Commission under Articles 81 and 82 of the EC Treaty, in which the Commission analyses the advantages for complainants to take action before a national court which may notably: • award damages for loss suffered as a result of a breach of Article 101 or 102 (see 18.4.1); • deal with claims for payment or contractual obligations based on an agreement covered by Article 101 TFEU; • apply the civil sanction of nullity of Article 101(2) TFEU in contractual relationships between individuals; • adopt interim measures; • hear combined claims under EU competition law with other claims under national law; and • award legal costs to the successful applicant. The basic principles governing the relations between the Commission and national courts are untouched. First, the principle of institutional and procedural autonomy continues to apply (see Case C-234/89 Delimitis v Henninger Bräu AG [1991] ECR I935: a national court may not declare Article 101(1) TFEU inapplicable to an agreement under Article 101(3) but may declare the agreement void under Article 101(2) if it is certain that the agreement cannot be exempted under Article 101(3) (para 55)). Secondly, Commission decisions always take precedence (see Case C-344/98 Masterfoods Ltd v HB Ice Cream Ltd [2000] ECR I-11369: a national court ruling on the compatibility of an agreement or practice with Articles 101(1) and 102 TFEU which is already the subject of a Commission decision, cannot take a decision running counter to that of the Commission even if the latter’s decision conflicts with a decision given by a national court of first instance (para 60)). This principle is now enshrined in Article 16(1) of Regulation 1/2003. Article 15 of the Regulation, which defines the different

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modes of cooperation between the Commission and national courts, is more innovative however. First, national courts ‘may ask the Commission to transmit to them information in its possession or its opinion on questions concerning the application of the [Union] competition rules’ (Article 15(1)). Secondly, copies of written judgments of national courts on the application of Article 101 or Article 102 TFEU must be forwarded to the Commission ‘without delay after the full written judgment is notified to the parties’ (Article 15(2)). Thirdly, in order to ensure a coherent application of Articles 101 and 102, the Commission, acting on its own initiative, may submit written and, with their permission, oral observations to national courts (Article 15(3)). European Commission Arts. 11–14 and 16(2) R1/2003 NCAs

Arts. 15 and 16(1) R1/2003 Art. 15(3) R1/2003

National courts

Figure 18.2 Cooperation between the Commission and NCAs and national courts

18.3.2.3

Review of public enforcement under Regulation 1/2003 The Commission reviewed the working of the new enforcement system in its Communication, ‘Ten Years of Antitrust Enforcement under Regulation 1/2003: Achievements and Future Perspectives’ (COM(2014) 453). Following a detailed analysis of public enforcement of competition rules under the 2003 Regulation, the Commission concludes that ‘Regulation 1/2003 has transformed the competition enforcement landscape’, notably by increasing the achievements of the Commission, the ECN and NCAs. Not only has the Regulation enabled the Commission to strengthen its enforcement record by devoting greater resources to investigating cases and conducting inquiries in key sectors of the economy suffering from market distortions, it has also fostered ‘a dynamic development of close cooperation within the ECN, which has underpinned the coherent application of the EU competition rules throughout the EU’ (para 43) by turning NCAs into key pillars of the enforcement of EU competition rules. The Commission believes that a ‘truly common competition enforcement area in the EU’ can be created on the basis of those achievements. For that purpose it has identified a few key areas for further improvement, namely (para 46): • the strengthening of NCAs’ independence by providing them with sufficient resources; • NCAs with full effective investigative and decision-making powers at their disposal; • the existence of powers to impose effective and proportionate fines and of welldesigned national leniency programmes; and • the existence of measures to remove disincentives for corporate leniency applicants.

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As the Commission observed in its proposal for a Directive to empower the competition authorities of the Member States to be more effective enforcers and to ensure the proper functioning of the internal market (COM(2017) 142 final), ‘[t]hese gaps and limitations in NCAs’ tools and guarantees mean that companies engaging in anti-competitive practices can face very different outcomes of proceedings depending on the Member States in which they are active’, leading to an uneven enforcement of the EU competition rules which, in turn, distorts competition within the internal market and undermines the decentralised enforcement system set up under the 2003 Regulation (at 3). According to the Commission’s own assessment, having been responsible for 85% of the 1,000 enforcement decisions taken by the Commission and the NCAs between 2004 and 2017, the latter have significantly boosted the enforcement of EU competition rules. Yet, it estimated that ‘each year losses of €181–€320 billion accrue owing to the existence of undiscovered cartels which typically increase prices by between 17% and 30%’ and that a number of sectors still suffered from a lack of competition across the internal market (see Executive summary of the impact assessment (SWD(2017) 115 final) at 2). Removing national obstacles preventing NCAs from being effective enforcers and enabling NCAs to effectively provide each other with mutual assistance were therefore seen as important measures to remove distortions to competition in the internal market and to safeguard close cooperation within the ECN. This is the general purpose of Directive (EU) 2019/1, ie to empower the competition authorities of the Member States to be more effective enforcers and to ensure the proper functioning of the internal market ([2019] OJ L 11/3). Covering the application of Articles 101 and 102 TFEU and the parallel application of national competition law to the same case, it sets out under Article 1(1) certain rules to ensure that national competition authorities have the necessary guarantees of independence, resources, and enforcement and fining powers to be able to effectively apply Articles 101 and 102 TFEU so that competition in the internal market is not distorted and that consumers and undertakings are not put at a disadvantage by national laws and measures which prevent national competition authorities from being effective. The Directive, whose deadline for its transposition by Member States is 4 February 2021, addresses the key areas for improvement identified in the 2014 review of the 2003 Regulation above, namely: • strengthening of NCAs’ independence by providing them with sufficient resources (Articles 4 and 5); • full effective investigative and decision-making powers at their disposal (Articles 6 to 12); • powers to impose effective and proportionate fines (Articles 13 to 16); • well-designed national leniency programmes measures to remove disincentives for corporate leniency applicants (Articles 17 to 23). As provided for under Article 1(3), the Directive also sets out ‘certain rules on mutual assistance to safeguard the smooth functioning of the internal market and the smooth functioning of the system of close cooperation within the European Competition Network’. These are covered by Articles 24 to 28.

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18.4 Private enforcement of competition rules Competition rules are enforced both by public and private enforcement systems which serve the same aims of deterring anti-competitive practices, protecting companies and consumers from these practices and making available damages caused by them. However, compared to US antitrust law, private enforcement under EU law had been lagging behind public enforcement. In the Green Paper on Damages actions for breach of the EC antitrust rules (COM(2005) 672 final), the Commission observed that [w]hile [Union] law … demands an effective system for damages claims for infringements of antitrust rules, this area of the law in the 25 Member States presents a picture of ‘total underdevelopment’. (at 3) There was therefore a need to address the imbalance between a modernised public enforcement system and a deficient system for bringing damages claims for infringements of EU competition rules. In the Commission’s view: Facilitating damages claims for breach of antitrust law will not only make it easier for consumers and firms who have suffered damages arising from an infringement of antitrust rules to recover their losses from the infringer but also strengthen the enforcement of antitrust law. (Green Paper at 1) As the Court rightly stated in Case C-453/99 Courage Ltd v Crehan and Crehan v Courage Ltd and Others [2001] ECR I-6297(as consistently reiterated in cases such as Case C-295/04 to C-298/04, Manfredi and Others EU:C:2006:461, paras 60 and 91; Case C-557/12 Kone and Others EU:C:2014:1317, paras 21 and 23; Case C-724/17 Skanska Industrial Solutions and Others EU:C:2019:204, para 25 and Case C-435/18 Otis Gesellschaft mbH and Others v Land Oberösterreich and Others EU:C:2019:1069, paras 22–24): The full effectiveness of Article [101] of the Treaty and, in particular, the practical effect of the prohibition laid down in Article [101(1)] would be put at risk if it were not open to any individual to claim damages for loss caused to him by a contract or by conduct liable to restrict or distort competition. Indeed, the existence of such a right strengthens the working of the [Union] competition rules and discourages agreements or practices, which are frequently covert, which are liable to restrict or distort competition. From that point of view, actions for damages before the national courts can make a significant contribution to the maintenance of effective competition in the [Union]. (paras 26–27, emphasis added) Any person is therefore entitled to claim compensation for harm suffered as a result of a breach of competition rules (see Manfredi, para 61; Kone, para 22; Skanska, para 26 and Otis, para 23). Actions for damages for breaches of EU competition rules have therefore a dual purpose: • to compensate those who have suffered a loss as a consequence of anti-competitive behaviour, thus involving companies and consumers more closely in competition law; and • to ensure the full effectiveness of competition rules by deterring anti-competitive behaviour.

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18.4.1 Private enforcement in the national courts As there was no effective system of damages claims under EU law and the EU Courts had no jurisdiction for such claims, this area of law enforcement was left to the national courts (subject to the preliminary rulings procedure, see Chapter 9). On the basis of the settled case law of the Court relating to the effective protection of EU rights by national courts, and following the same principles as those applied in State liability actions (see 7.3), the Court ruled in Courage v Crehan: … in the absence of [Union] rules governing the matter, it is for the domestic legal system of each Member State to designate the courts and tribunals having jurisdiction and to lay down the detailed procedural rules governing actions for safeguarding rights which individuals derive directly from [Union] law, provided that such rules are not less favourable than those governing similar domestic actions (principle of equivalence) and that they do not render practically impossible or excessively difficult the exercise of rights conferred by [Union] law (principle of effectiveness) … (para 29) However, the effectiveness of the system of damages actions for infringement of EU competition rules was significantly impeded by the diversity and sometimes underdevelopment of national rules. This can result in great legal uncertainty and, in practice, in victims of EU competition breaches rarely obtaining adequate reparation for the harm suffered. These obstacles are analysed in great detail in the Commission Staff Working Paper annexed to the Green Paper (SEC(2005) 1732) in paras 28 to 44. The Commission consequently concluded in the White Paper on Damages actions for breach of the EC antitrust rules (COM(2008) 165 final) that, in order to create a better level playing field and legal certainty within the internal market, the ‘ineffectiveness of antitrust damages actions [was] best addressed by a combination of measures at both [Union] and national levels’ (at 2). Damages for loss caused by a cartel: ‘lift off!’

e cas ple m a ex

The Kone case In 2007, the Commission fined the Kone, Otis, Schindler and ThyssenKrupp groups for participating in cartels involving the installation and maintenance of elevators and escalators in Belgium, Germany, Luxembourg and the Netherlands. In 2008, the Austrian authorities also fined Kone, Otis and Schindler for implementing a cartel relating to the same goods on the Austrian market. The latter cartel guaranteed for its members a price higher than the one expectable under normal competitive conditions. ÖBB-Infrastruktur AG, a subsidiary of the Austrian Federal Railways, had bought elevators and escalators from companies that were not party to the cartel. However, it claimed that it suffered a loss on the ground that, had the cartel not existed, its suppliers would not have set a price higher than that which would have been achievable. It therefore brought proceedings in the Austrian courts and claimed compensation for that loss from the members of the Austrian cartel. However, under Austrian law, ÖBB would not be entitled to compensation since its loss was caused by a decision of its supplier, which was not party to the cartel and was acting lawfully. By way of a preliminary reference, the Austrian Supreme Court asked the Court of Justice whether the cartel members could be found liable under EU law for the loss that ÖBB claimed to have sustained. The Court reasoned that, market price being one of the main factors taken into consideration by undertakings when determining the price of their goods or services,

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[w]here a cartel manages to maintain artificially high prices for particular goods … it cannot be ruled out that a competing undertaking, outside the cartel in question, might choose to set the price of its offer at an amount higher than it would have chosen under normal conditions of competition, that is, in the absence of that cartel. In such a situation, even if the determination of an offer price is regarded as a purely autonomous decision, taken by the undertaking not party to a cartel, it must none the less be stated that such a decision has been able to be taken by reference to a market price distorted by that cartel and, as a result, contrary to the competition rules. (para 28) (the so-called ‘umbrella pricing’ phenomenon) The Court therefore ruled that a loss being suffered by the customer of an undertaking not party to a cartel, but benefiting from the economic conditions of umbrella pricing, because of an offer price higher than it would have been but for the existence of that cartel is one of the possible effects of the cartel, that the members thereof cannot disregard. (para 29) Therefore, EU law precluded the Austrian legislation insofar as it required that a contractual link existed between the victim and the members of the cartel, thus putting at risk the full effectiveness of Article 101 TFEU. The Otis case In 2007 the European Commission imposed fines on Otis, Schindler, Kone and ThyssenKrupp for their participation, since the 1980s, in cartels for the installation and maintenance of lifts and escalators. This was followed by an action for damages brought by the Commission for losses incurred as a customer of those companies (see Case C-199/11 Europese Gemeenschap v Otis NV and Others EU:C:2012:684). As this case covered only four EU Member States, namely Belgium, Germany, Luxembourg and the Netherlands, Austrian authorities on their side investigated the conduct of the members of that cartel within the Austrian territory. Following the judgment of the Austrian Supreme Court of 8 October 2008 upholding the order of Antitrust Court of 14 December 2007 imposing fines on Otis, Schindler and Kone, as well as on two other companies, as a result of their anti-competitive behaviour in Austria, many companies and entities brought actions for damages to the Vienna commercial court. One of those applicants was the authority of the Land Oberösterreich (Province of Upper Austria). The province authority did not claim to have suffered loss as a purchaser of the products covered by the cartel but rather as a body granting subsidies for their purchasing. The province indeed granted subsidies in the form of promotional loans for the purpose of financing construction projects affected by the cartel. It claimed that, as a result of increased construction costs caused by the cartel, it had to grant subsidies in a higher amount than in the case where that cartel had not existed. The Viennese court rejected the claim on the ground that the Province of Upper Austria was not an operator active on the market for lifts and escalators and thus suffered merely indirect loss which could not give rise to compensation. This court’s judgment was quashed on appeal by the Vienna Regional Court which considered that the prohibition of cartels serves also to protect the financial interests of those who must incur additional costs resulting from the distortion of market conditions. The case reached the Austrian Supreme Court which asked the Court of Justice whether persons, such as the Austrian province, may seek compensation for the losses they have suffered as a result of the fact that the amount of those subsidies was higher than what it would have been without that cartel and they were not able to use that difference more profitably. Following the classic jurisprudence of Courage, Manfredi, Kone and Skanska (see above), the Court of Justice ruled that … any loss which has a causal connection with an infringement of Article 101 TFEU must be capable of giving rise to compensation in order to ensure the effective application of Article 101 TFEU and to guarantee the effectiveness of that provision. (para 30)

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… [without it being necessary] that the loss suffered by the person concerned present, in addition, a specific connection with the ‘objective of protection’ pursued by Article 101 TFEU. (para 31) Therefore, a person not operating as supplier or as customer on the market affected by a cartel may request compensation for loss caused by that cartel. It is then for the national court to determine whether that person has actually suffered such loss and, if so, whether there is evidence of the existence of a causal connection between that loss and the cartel at issue.

18.4.2 The new EU regime governing actions for damages under national law for breaches of competition law On the basis of the White Paper, in 2009, the Commission made an initial proposal for a Directive on the rules governing damages actions for infringements of Articles 81 and 82 of the Treaty, which was soon abandoned as a result of the many divergent views from the Member States. Following years of further and hard negotiations, Directive 2014/104/EU on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union was finally adopted on 26 November 2014. 18.4.2.1

Aims and objectives of the Directive The 2014 Directive first aims to harmonise certain procedures across the European Union for claimants seeking to bring damages actions for harm caused by breaches of competition law. The Directive is designed to smooth out the discrepancies between the national rules on actions for damages leading to an uneven playing field with regard to such actions and potentially affecting competition on the markets. Uneven enforcement of the right to compensation in EU law affects not only competition within the internal market by providing a competitive advantage for some undertakings breaching EU rules, but also the proper functioning of the internal market by potentially deterring companies from exercising their rights of establishment or from providing goods or services in Member States where the right to reparation is more effectively enforced. It also seeks to correct the imbalance between an effective public enforcement at EU and national levels and an ineffective access to private enforcement of competition law in national courts, and to create better interaction between both forms of enforcement to ensure maximum effectiveness of competition rules by ‘[regulating] the coordination of those two forms of enforcement in a coherent manner’ (recital 6 of the preamble to the Directive). Finally, regarding actions for damages as ‘only one element of an effective system of private enforcement of infringements of competition law’, it seeks to provide alternative measures of redress, such as consensual dispute resolution and public enforcement decisions giving parties an incentive to provide compensation as a complement (see recital 5 of the preamble to the Directive). This is summed up in Article 1 of the Directive, which states: 1. This Directive sets out certain rules necessary to ensure that anyone who has suffered harm caused by an infringement of competition law by an undertaking or by an association of undertakings can effectively exercise the right to claim full compensation for that harm from that undertaking or association. It sets out rules

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fostering undistorted competition in the internal market and removing obstacles to its proper functioning, by ensuring equivalent protection throughout the Union for anyone who has suffered such harm. 2. This Directive sets out rules coordinating the enforcement of the competition rules by competition authorities and the enforcement of those rules in damages actions before national courts. 18.4.2.2

Key provisions of the Directive Right to full compensation The whole Directive lies on the fundamental principle of the right to full compensation. This is expressed in Article 3(2), which states: Full compensation shall place a person who has suffered harm in the position in which that person would have been had the infringement of competition law not been committed. It shall therefore cover the right to compensation for actual loss and for loss of profit, plus the payment of interest. The right must be guaranteed in all Member States (Article 3(1)) so as to avoid ‘forum shopping’, that is seeking the most favourable jurisdiction in which to bring a claim. As stated in Joined Cases C-295/04 to C-298/04 Manfredi v Lloyd Adriatico Assicurazioni SpA, Cannito v Fondiaria Sai SpA and Tricarico and Murgolo v Assitalia SpA [2006] ECR I-6619, para 95 … compensation includes reparation not only for actual loss suffered (damnum emergens), but also for loss of profit (lucrum cessans) and the payment of interest. (para 95) This definition of compensation is now provided in Article 3(2) and can in no way include ‘overcompensation, whether by means of punitive, multiple or other types of damages’ (Article 3(3)). Under the Directive, both direct purchasers (anyone who bought directly from an infringer, products or services that were the object of the breach of competition rules) and indirect purchasers (anyone who bought products or services that were the object of a breach of competition rules from a direct purchaser or a subsequent purchaser rather than directly from the infringer) of the goods or services sold by an infringer can claim compensation of harm (Article 12(1)). Under Article 14(2), indirect purchasers may rely on a rebuttable presumption (as recommended by the Commission in the White Paper, para 2.6) that they have suffered a loss as a result of a passing-on of an illegal overcharge when it can be shown that: • the defendant has committed an infringement of competition law; • the latter has resulted in overcharge for a direct purchaser of the defendant; and • the indirect purchaser purchased from the direct purchaser the goods or services that were the object of the infringement. This is an important development for indirect purchasers as it is more difficult for them to prove the existence and extent of a passing-on of an illegal overcharge since, by definition, they are at or close to the end of the distribution chain and therefore farther from the infringement of a competition rule.

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Proof of a breach of competition rules As explained above (see 18.3.2.2), it is a settled principle of EU law that national courts cannot take decisions running counter to decisions of the European Commission. Infringement decisions of the Commission are binding on national courts. Article 9 extends the binding effect on national courts to infringement decisions of NCAs. This is designed to facilitate the bringing of actions for antitrust damages, increase their effectiveness and procedural efficiency, and increase legal certainty by ensuring a consistent application of Articles 101 and 102 by national bodies. It would make little sense indeed if defendants could challenge in an action for damages their own breach of Article 101 or 102 already established in a final decision by an NCA, confirmed by a review court. This would oblige the national court to reexamine the facts and legal issues already investigated and assessed by those bodies, thus potentially increasing the duration of the damages action and therefore making it considerably more costly and imponderable. For that reason, a national court ruling in a follow-on action for antitrust damages cannot take decisions running counter to a final decision of a NCA or of a review court of the same State. The infringement found in those decisions is thus deemed to be irrefutably established (Article 9(1)). Equally, a national court must treat the finding of an infringement in a final decision of a NCA or of a review court in a different Member State as at least prima facie evidence, and may assess that decision along with any other evidence provided in court (Article 9(2)). These obligations do not prevent, however, national courts from seeking clarification on the interpretation of Articles 101 or 102 TFEU under Article 267 TFEU (see Chapter 9). Limitation periods Limitation periods or prescriptions play an important role in providing legal certainty, but they can also be a major obstacle to recovering damages, either in stand-alone or follow-on cases (on the diversity of the rules on limitation periods in national and EU laws, see the Staff Working Document annexed to the Green Paper, paras 261–272). The commencement of limitation periods presents many difficulties, in particular in the case of continuous or repeated infringements or when the victim cannot reasonably be aware of them. This is frequently the case for cartels, which by definition are covert during their whole existence. Consequently, the Directive gives claimants a period of at least five years to bring actions for damages (Article 10(3)), which cannot start before the infringement of competition law has ceased and before the claimants know, or can reasonably be expected to know of its existence, the harm caused to them by the infringement and the identity of the infringer (Article 10(2)). Contrary to the Commission’s recommendation in the White Paper (para 2.7), Article 10(4) provides for the limitation period to be suspended or interrupted where an NCA decides to initiate an investigation or proceedings with respect to an infringement relating to the damages claim. The suspension should then continue for at least a year following the final NCA decision or the termination of the proceedings. (For an interpretation of Article 10(2) to (4), see Case C-637/17 Cogeco Communications Inc v Sport TV Portugal SA and Others EU:C:2019:32, in which the Court found that the Portuguese law transposing the Directive, which provided that the limitation period in respect of actions for damages was three years and did not

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include any possibility of suspending or interrupting that period during proceedings before the national competition authority, was in breach of Article 102 TFEU and the principle of effectiveness.) These new rules should potentially give rise to actions for competition law breaches running over decades. Joint and several liability With a limited exception for small or medium-sized enterprises (SMEs) as defined in Commission Recommendation 2003/361/EC, undertakings which have infringed competition law through joint behaviour, such as in cartels, are to be held jointly and severally liable for the harm caused as a result of this infringement (Article 11(1) and (2) of the Directive). The victim of an infringement can therefore choose to sue one or more infringers until fully compensated. Should one of the infringers not be sued, another co-infringer might still try to recover a contribution for its share in the infringement. Nonetheless, in order to preserve the efficiency of the Commission and national leniency programmes (see 18.3.2.1), the civil liability of successful immunity applicants could be limited. As suggested by the Commission in the White Paper (para 2.9), Article 11(4) of the Directive provides that the liability of immunity recipients (an undertaking or natural person who was granted immunity from fines by the Commission or a NCA under a leniency programme) is limited to the harm they caused to their own direct and indirect purchasers or providers, and to other victims unless full compensation cannot be obtained from the other co-infringers. In the latter case, the right to full compensation is thus protected by maintaining the full liability of the immunity recipients. Disclosure of evidence Article 5(1) and (2) stipulates that, when claimants have presented a reasoned justification demonstrating the plausibility of their claim for damages, national courts must have the power to order the defendant or a third party to disclose relevant evidence in their control, and notably to order the disclosure of specified items of evidence or relevant categories of evidence defined as precisely and as narrowly as possible. Equally, national courts must be able, upon request of the defendant, to order the claimant or a third party to disclose relevant evidence. Disclosure must be proportionate, taking account of the legitimate interests of all parties and third parties (Articles 5(3) and 6(4)). Where confidential documents must be disclosed, national courts must ‘have at their disposal effective measures to protect such information’ (Article 5(4)). This power of disclosure is, however, subject to two limitations: • under Article 6(5), information prepared specifically for the proceedings of a NCA, or information prepared by the NCA and sent to the parties during its proceedings, and withdrawn settlement submissions are temporarily protected against disclosure until the closure of the NCA’s proceedings; and • under Article 6(6), leniency statements and settlement submissions are fully protected from disclosure. Passing-on defence Passing-on defence means that the defendant argues that the direct purchaser, as claimant in the damages action, should either be entitled to no or limited reparation on

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the ground that the whole or part of the overcharge resulting from the infringement was passed on to the claimant’s customers. The right to invoke such defence is now enshrined in Article 13 of the Directive. In support of this defence, the defendant may require disclosure from the claimant or from third parties in order to prove that the overcharge was passed on. Quantification of harm As compensation for harm caused is designed to place the victims of the antitrust infringement in the position in which they would have been before it occurred, their post-infringement position has to be compared with their pre-infringement one (the ‘non-infringement or counterfactual scenario’) in an assessment which is usually referred to as the ‘but-for analysis’. Once a national court has determined whether the claimant has suffered harm because of an antitrust breach – namely that it has made a finding of an infringement and the causal link between this infringement and the harm suffered – it has then to award an amount to the claimant as compensation for that harm. Assessing and proving the quantum of damages or quantification is often difficult, however, as this is based on a hypothetical situation and on a form of estimation necessary to build up a counterfactual scenario with which to compare the postinfringement position of the claimant. Nevertheless, this is the central question in all antitrust damages actions. Under Article 17(1) of the Directive, national courts are … empowered, in accordance with national procedures, to estimate the amount of harm if it is established that a claimant suffered harm but it is practically impossible or excessively difficult precisely to quantify the harm suffered on the basis of the evidence available. In this respect, a NCA may, at their request, assist national courts if it considers such assistance to be appropriate (Article 17(3)). Article 17(2) also provides a rebuttable presumption that a cartel causes harm. This should help lower claimants’ costs since it will no longer be required to prove that a cartel caused higher prices. Consensual dispute resolution As clearly stated in recital 5 of the preamble to the Directive: Actions for damages are only one element of an effective system of private enforcement of infringements of competition law and are complemented by alternative avenues of redress, such as consensual dispute resolution and public enforcement decisions that give parties an incentive to provide compensation. The promotion of consensual dispute resolution (CDR) is in line with the overall objective of the Directive to ensure that all victims of breaches of competition rules can enforce their right to claim full compensation from the infringer(s), since it is deemed to be a cheaper and faster way of resolving disputes by involving out-of-court settlements, arbitration, mediation or conciliation. Under Article 18(1) of the Directive, the limitation period for bringing an action for damages must be suspended for the duration of any consensual dispute resolution process ‘with regard to those parties that are or that were involved or represented in the consensual dispute resolution’.

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Where the parties are involved in CDR, courts’ proceedings can be suspended for up to two years (Article 18(2)). In order to protect settling co-infringers, Article 19(2) provides that non-settling coinfringers cannot be permitted to recover contribution for the remaining claim from the former. Settling co-infringers will, however, be held jointly and severally liable for the award of damages made against non-settling co-infringers only if the latter are unable to pay the compensation owed (Article 19(3)). In order to avoid overcompensation of claimants, when awarding damages, national courts must take account of any damages paid in accordance with a prior consensual settlement relating to a particular breach of competition (Article 19(4)). Temporal application of the Directive Regarding its application ratione temporis, the 2014 Directive contains a special provision which explicitly states the conditions for the temporal application of its procedural and substantive provisions. Article 22(1) of the Directive provides that Member States had to ensure that the national measures transposing the substantive provisions of that Directive do not apply retroactively. And, under Article 22(2), Member States had to ensure that any national measures complying with the procedural provisions of that Directive do not apply to actions for damages of which a national court was seized prior to 26 December 2014 (that is two years before the transposition deadline of 27 December 2016). Article 22(2) therefore gave the Member States some discretion in deciding whether the national rules transposing the procedural provisions of the Directive would apply to actions for damages brought after 26 December 2014 but before the date of transposition of that Directive or before 27 December 2016 at the latest (see Cogeco, para 28). As a result, if Member States had decided that such national provisions were not applicable to actions for damages brought before their date of entry into force, actions brought after 26 December 2014 but before 27 December 2016 remain governed solely by the national procedural rules that were already in force before the transposition of the Directive (Cogeco, para 29). Right to full compensation (Article 3)

Passing-on defence (Article 13)

Quantification of harm (Article 17)

Proof of breach of competition rules (Article 9)

Disclosure of evidence (Articles 5–7)

Consensual dispute resolution (Articles 18–19)

Limitation periods (Article 10)

Joint and several liability (Article 11)

Figure 18.3 Damages for breaches of competition rules under the 2014 Directive

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18.5 Further reading Basedow J, ‘International Antitrust: From Extraterritorial Application to Harmonization’ (2000) 60 La L Rev 1037. Breathnach S, ‘Sweetening the Carrot: the Role of Leniency Programmes in the Fight against Cartels’ (2013) 34(1) ECLR 12. Brook O, ‘Struggling with Article 101(3) TFEU: Diverging Approaches of the Commission, EU Courts, and Five Competition Authorities’ (2019) 56 CML Rev 121. Camilleri E, ‘A Decade of EU Antitrust Private Enforcement: Chronicle of a Failure Foretold?’ (2013) 34(10) ECLR 531. Cengiz F, ‘Multi-Level Governance in Competition Policy: the European Competition Network’ (2010) 35(5) EL Rev 660. Ehlermann C, ‘The Modernisation of EC Anti-trust Policy: A Legal and Cultural Revolution’ (2000) 37 CMLRev 537. Ford S, ‘Claims for Contribution in Competition Damages Actions: the Impact of the EU Damages Directive’ (2015) 36(8) ECLR 327. Gamble R, ‘The European Embrace of Private Enforcement: this Time with Feeling’ (2014) 35(10) ECLR 469. Killeen D, ‘Following in “Uncle Sam’s” Footsteps? The Evolution of Private Antitrust Enforcement in the European Union’ (2013) 34(9) ECLR 480. Komninos A, ‘Public and Private Antitrust Enforcement in Europe: Complement? Overlap?’ (2006) 3(1) Competition Law Review 5. Lianos I, ‘Causal Uncertainty and Damages Claims for Infringement of Competition Law in Europe’ (2015) CLES Research Paper Series 2/2015. Mateus A, ‘Ensuring a More Level Playing Field in Competition Enforcement Throughout the European Union’ (2010) 31(12) ECLR 514. Nazzini R, ‘Fundamental Rights beyond Legal Positivism: Rethinking the ne bis in idem Principle in EU Competition Law’ (2014) 2(2) Journal of Antitrust Enforcement 270. Nowag J and Tarkkila L, ‘How much Effectiveness for the EU Damages Directive? Contractual Clauses and Antitrust Damages Actions’ (2020) 57 CML Rev 433. Prek M and Lefèvre S, ‘Competition Litigation before the General Court: Quality if not Quantity?’ (2016) CML Rev 65. Segal I and Whinston M, ‘Public vs Private Enforcement of Antitrust Law: A Survey’ (2007) 28(5) ECLR 306. de Sousa e Alvim M, ‘The New EU Directive on Antitrust Damages – a Giant Step Forward?’ (2015) 36(6) ECLR 245. Slot P, ‘A View from the Mountain: 40 Years of Developments in EC Competition Law’ (2004) 41 CML Rev 443. Strand M, ‘Competition Damages betwixt and between Past and Future: Cogeco’ (2020) 57 CML Rev 569. Wils W, ‘The Relationship Between Public Antitrust Enforcement and Private Actions for Damages’ (2009) 32(1) World Competition 3. Wurmnest W, ‘Liability of “Undertakings” in Damages Actions for Breach of Articles 101, 102 TFEU: Skanska’ (2020) 57 CML Rev 915.

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The enforcement system of competition rules serves the aims of deterring anticompetitive practices and protecting companies and consumers from these practices. It must also offer damages to parties injured by such practices. Both public and private enforcement are therefore an important part of a common enforcement system aimed at guaranteeing a competitive economy. Compared to the American antitrust enforcement system where private enforcement is predominant, public enforcement has prevailed in the European Community and Union. This was a natural development in the initial creation of a European common market. Furthermore, as part of the integration process, the original system of supervision and enforcement of competition rules could only be highly centralised. However, in order to face successfully the challenges of further enlargement to Eastern and Central Europe and further economic and monetary integration, public enforcement undertook a complete overhaul under Regulation 1/2003, leading to the modernisation and decentralisation of the enforcement of competition rules, thus involving fully national competition authorities and national courts in the application of EU competition rules. This, in turn, revolutionised the relationship between the European Commission and national competition authorities on the one hand, and between national competition authorities themselves on the other. It also changed the nature of the cooperation between the Commission and national courts. In parallel, while private enforcement under EU law was lagging behind public enforcement and while, in the absence of an effective system of damages claims under EU law, this area of law enforcement was left to the national courts, it was soon recognised by the Commission that facilitating damages claims for breach of competition law would strengthen the enforcement of European antitrust law and that the ineffectiveness of damages actions would be best addressed by a combination of measures at both Union and national levels. After more than 10 years of negotiations, this imbalance between the two legs of the EU enforcement system of competition rules was corrected by the adoption of the 2014 Directive on damages actions for breaches of competition law. Naturally, private and public enforcement of competition rules would be seriously limited, should EU competition rules not apply to undertakings located outside the European Union. The principle of territoriality enables the European authorities to reach out to such entities. Furthermore, the European Union has also engaged in international cooperation with competition authorities of third countries by way of bilateral competition agreements or a variety of association, partnership and free trade agreements.

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Test Your Knowledge

ur t yo dge s e t wle kno

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Critically analyse the ruling of the CJEU in Case C-17/10 Toshiba Corporation and Others v Úrˇ ad pro ochranu hospodárˇ ské souteˇ že EU:C:2012:72 on the parallel application of national and Union competition law. It could be stated that the public enforcement of Articles 101 and 102 TFEU does not suffer from the deficiencies of US public enforcement and that there is no reason therefore to import into the European Union the American conception of actions for damages as an instrument of deterrence and punishment. Discuss. Critically analyse Case C-557/12 Kone AG v OBB-Infrastruktur AG EU:C:2014:1317 on damages for losses caused by a cartel. In your opinion, is Directive 2014/104/EU on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union ([2014] OJ L349/1) likely to endanger the effectiveness of the EU public enforcement of competition law whilst failing to achieve the objectives underpinning private enforcement?

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PART VI

EUROPEAN CITIZENSHIP AND THE FREE MOVEMENT OF EUROPEAN CITIZENS 19 European Citizenship

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European Citizenship

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European Citizenship

After reading this chapter, you will be able to understand: • the concept of European citizenship • the status of European citizens • the political and legal rights of European citizens.

19.1 Introduction The concept of European citizenship, additional to national citizenship, is the necessary corollary of the European integration process. The Maastricht Treaty of 1992 was the first stone laid down for the establishment of ‘a citizenship common to nationals of their countries’ (recital 8 of the preamble to the Maastricht Treaty on European Union). The clear intention of the Member States materialised in Article 8 of the Maastricht Treaty establishing the European Community, which simply states that ‘Citizenship of the Union is hereby established’. The concept of European citizenship is now firmly enshrined in Articles 9 TEU and 20(1) TFEU, and in Chapter V (Articles 39–46) of the Charter of Fundamental Rights of the European Union (ECFR). Uneasy to define, the Court of Justice elevated this concept to one that is ‘destined to be the fundamental status of nationals of the Member States’ (Case C-184/99 Grzelczyk v Centre public d’aide sociale d’Ottignies-Louvain-la-Neuve [2001] ECR I-6193, para 31) which confers a number of political and legal rights to citizens of the Union. However, as the Court’s case law shows, the concept of European citizenship is still affected by its ambiguous nature and its own limits, and has been developed through a pragmatic approach.

19.2 From a People’s Europe to European citizenship 19.2.1 People’s Europe and citizens’ Europe The concept of a People’s Europe was first coined at the European Council meeting at Fontainebleau of 25–26 June 1984 (Conclusions of the presidency are available at – search ‘Fontainebleau 1984’) in order for the former European Community to ‘respond to the expectations of the people of Europe by adopting measures to strengthen and promote its identity and its image both for its citizens and for the rest of the world’ (at 8). The European Council decided to set up an ad hoc Committee (the Adonnino Committee), composed of representatives of the Heads of State or of Government of the Member States, to prepare and coordinate this action.

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The Committee made a number of proposals in its report, ‘A People’s Europe’ (Bulletin of the European Communities, Supplement 7/85). The first report of March 1985 focused on: • easing the rules and practices causing irritation to Community citizens and undermining the credibility of the Community, notably ‘the abolition of all police and customs formalities for people crossing intra-Community frontiers’ (at 8); • extending Community citizens’ rights with regard to the right of establishment, mutual recognition of professional qualifications and the right of residence. The second report of June 1985 extended the issue to special rights of citizens, such as: • greater participation in the political process in the Community (voting rights and eligibility in local elections); • same rights as nationals to freedom of speech and of assembly; consultation of citizens on transfrontier issues (eg, major public works, environmental issues, transport, and health and safety matters) within the Community; and • codification and simplification of Community law. A number of those rights recognised in A People’s Europe are certainly rights that are inherent to the concept of European citizenship and in particular its political aspect. But most of those rights are also attached to the economic integration process and are part of a wider, modern conception of citizenship. Although the division between the two concepts of a People’s Europe and European citizenship might be blurred, the former ignores the human rights dimension of European citizenship. For that reason, in its ‘Resolution on the functioning of the Treaty on European Union with a view to the 1996 Intergovernmental Conference – Implementation and development of the Union’, 17 May 1995 ([1995] OJ C151/56), the European Parliament called for the concept of EU citizenship to be given greater substance through the development of the special rights linked to EU citizenship, notably by means of: • accession of the European Union to the European Convention on Human Rights and Fundamental Freedoms (ECHR); • a new right of all EU citizens to information on EU matters; • the inclusion of an explicit reference in the Treaty to the principle of equal treatment irrespective of race, sex, age, handicap or religion and the incorporation of a specific reference to a ban on capital punishment; • the development of political citizenship through measures facilitating participation in political life in a Member State of Union citizens residing in that State; • the strengthening of the provisions on the free movement of persons; • the preservation of Europe’s diversity through special safeguards for traditional national minorities, democracy and the rule of law; • the application of the Treaty provisions on equal rights not only to economic rights but to all aspects of equality for women; and • the adoption of Treaty provisions rejecting racism, xenophobia, sexism, discrimination on grounds of a person’s sexual orientation, antisemitism, revisionism and all forms of discrimination, and guaranteeing adequate legal protection against discrimination for all individuals resident within the EU. It is this concept of European citizenship that has been enshrined in the Treaty on European Union.

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19.2.2 European citizenship under the EU treaties European citizenship was first created in the Maastricht Treaty of 1992 (see 1.5) with the view to bringing European citizens closer to the European Union integration process. The new Article 8 TEC (as inserted by the Maastricht Treaty) simply provided that: 1. Citizenship of the Union is hereby established. Every person holding the nationality of a Member State shall be a citizen of the Union. 2. Citizens of the Union shall enjoy the rights conferred by this Treaty and shall be subject to the duties imposed thereby. Articles 8a–8e described a range of rights linked to European citizenship but no definition of the concept is to be found. Those original provisions on European citizenship have hardly been amended by successive Treaties and can now be found in Article 9 TEU and Articles 20 to 25 TFEU.

19.2.3 European citizenship and national citizenship If European citizenship is naturally linked to national citizenship, it is essentially different from it. European citizenship is conditional on having the nationality of one of the Member States. Under Article 9, third sentence TEU and Article 20(1), second sentence TFEU, ‘[e]very national of a Member State shall be a citizen of the Union’. It is therefore for each Member State’s laws to determine the conditions for the granting, refusal or loss of nationality. This has been reiterated on many occasions by the Court of Justice in settled case law since Case C-369/90 Micheletti and others v Delegación del Gobierno en Cantabria [1992] ECR I-4239: Under international law, it is for each Member State, having due regard to [Union] law, to lay down the conditions for the acquisition and loss of nationality. However, it is not permissible for the legislation of a Member State to restrict the effects of the grant of the nationality of another Member State by imposing an additional condition for recognition of that nationality with a view to the exercise of the fundamental freedoms provided for in the Treaty. (para 10) (See also Case C-200/02 Zhu and Chen v Secretary of State for the Home Department [2004] ECR I-9925, para 37.) However, the limits of this approach can be found in Case C-135/08 Rottmann v Freistaat Bayern [2010] ECR I-1449.

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cas ple The case of Rottmann concerned the loss with retroactive effect of Mr Rottmann’s German m exa nationality. An Austrian national, he had acquired German nationality by naturalisation on account of deception practised in that acquisition. As the acquisition of his German nationality automatically led to the loss of his Austrian nationality, Mr Rottmann found himself stateless, leading to the loss of the status of citizen of the European Union. The Court accepted that … it is not contrary to European Union law, in particular to Article [20(1) TFEU], for a Member State to withdraw from a citizen of the Union the nationality of that State acquired by naturalisation when that nationality has been obtained by deception, on condition that the decision to withdraw observes the principle of proportionality. (para 59)

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The Court noted, however, that, at the time of its judgment, the withdrawal of the German nationality by naturalisation had not become definitive and that no decision concerning Rottmann’s status has been taken by Austria. As a result, the Court could not draw any conclusion as to the compatibility of a national decision that had not yet been taken with EU law. However, as the Court put it, … the fact that a matter falls within the competence of the Member States does not alter the fact that, in situations covered by European Union law, the national rules concerned must have due regard to the latter … (para 39) Mr Rottmann, faced with a decision withdrawing his German naturalisation, and after losing his Austrian nationality, would be placed in a position of losing his status of European citizen and the rights attached to it. Such a situation would therefore be covered by European Union law (para 40). It is therefore clear that the Member States would have to take a decision, such as reinstating the original nationality, so as not to deprive an EU national, such as Mr Rottmann, of his EU citizen status.

The issue of the compatibility with EU law of loss of nationality of a Member State and therefore loss of Union citizenship was raised again more recently in Case C-221/17 MG Tjebbes and Others v Minister van Buitenlandse Zaken EU:C:2019:189. Seeking to introduce ‘a system to avoid the undesirable consequences of one person having multiple nationalities’ (para 34), the Dutch legislator adopted a law on nationality whereby adults would lose their Dutch nationality if they also held a foreign nationality and they elected to have their principal residence for an uninterrupted period of 10 years outside the Netherlands or the EU territories. Equally, minors would lose Dutch nationality if their father or mother had lost his or her Dutch nationality for the reason mentioned above. However, that 10-year period would be deemed interrupted if the persons concerned either had their principal residence in the Netherlands or in the EU for a period of no less than one year or had applied for the issue of a declaration regarding the possession of Dutch nationality, a passport or an identity card. On the basis of this law, the Minister of Foreign Affairs refused to examine the applications for renewal of their national passports by a number of Dutch citizens who possessed a second nationality of a non-EU country and had lived in a non-EU country for more than 10 years. Referring to Rottmann, the court reiterated a number of principles regarding nationality, notably that it is legitimate for a Member State to wish to protect the special relationship of solidarity and good faith between it and its nationals and also the reciprocity of rights and duties, which form the bedrock of the bond of nationality. (para 33) Since nationality can be viewed as the expression of a genuine link between a State and its nationals, it would be legitimate for that State to prescribe loss of nationality should such genuine link be absent or lost, or to protect the unity of nationality within the same family (para 35). As a result, the fact of having one’s habitual residence outside the Netherlands or the EU territories for 10 years could be regarded as an ‘indication that there is no such link’, and the lack of such link between Dutch parents and their country could imply that their children have, in principle, no genuine link with that country either. Further, as the application of the Dutch law is conditional on the possession by a Dutch citizen of the nationality of another State, the risk of becoming stateless is precluded. Equally, Dutch nationals would be regarded as intending to retain a genuine link with the Netherlands should they apply for the issue of a declaration

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regarding the possession of Dutch nationality, a passport or an identity card within the prescribed 10-year period. The Court concluded that the Dutch legislation concerned did not breach Article 20 TFEU read in light of Articles 7 (Respect for private and family life) and 24 (Rights of the child) of the European Charter of Fundamental Rights insofar as the competent national authorities and/or national courts are able to examine the consequences of the loss of nationality and therefore the loss of Union citizenship and, where appropriate, to have the persons concerned recover their nationality ex tunc in the context of an application by those persons for a travel document or any other document showing their nationality. Such examination must be conducted with ‘due regard to the principle of proportionality so far as concerns the consequences of that loss [of nationality and Union citizenship] for the situation of each person concerned and, if relevant, for that of the members of their family, from the point of view of EU law’ (para 48). Conditional on national citizenship, as Article 9, third sentence TEU and Article 20(1), third sentence TFEU provide, European citizenship is ‘additional to national citizenship and shall not replace it’. Initially, following the amendment under the 1997 Treaty of Amsterdam (see 1.5), former Article 8(1) TEC stated that ‘[c]itizenship of the Union shall complement and not replace national citizenship’. The word ‘complement’ was unfortunate as it suggested that European citizenship was a subsidiary element of national citizenship. By contrast, the word ‘additional’ rather suggests that EU nationals have the benefit of a dual citizenship. Every British national, like every national of other Member States, is therefore also a European citizen. Yet the two citizenships are fundamentally different. First, European citizenship is governed by Union law, and national citizenship by the national laws of the Member States. Secondly, European citizenship does not overrule the rights conferred upon EU nationals by their respective national citizenship but grants additional rights to be exercised under EU law, such as the right of free movement and residence in another Member State, and the right to vote, or to stand, at European or local elections.

19.3 The status of European citizens Under Article 20(2) TFEU: Citizens of the Union shall enjoy the rights and be subject to the duties provided for in the Treaties. The wording of this provision gives the impression that rights and duties are on the same footing. The prohibition of discrimination on the ground of nationality (Article 18 TFEU) or the respect of the principle of equal pay for male and female workers for equal work or work of equal value (Article 157(1) TFEU) might be regarded as such duties, yet the Treaty on European Union and the Treaty on the Functioning of the European Union are not specific in this regard. Duties are nowhere to be found. By contrast, the legal and political rights deriving from EU citizenship are clearly and specifically listed in Articles 20(2), 21(1) and 22–24 TFEU. European citizenship has become a status that not only confers on EU nationals rights and duties which are additional to those deriving from national citizenship, but also draws a distinction between EU nationals and third country nationals.

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19.3.1 Citizenship as the fundamental status of EU nationals In the past 15 years, the Court has developed a remarkable case law on the concept of European citizenship and its effects, giving it a strong symbolic and practical value.

In Case C-184/99 Grzelczyk v Centre public d’aide sociale d’Ottignies-Louvain-la-Neuve [2001] ECR I-6193, which concerned the right of residence for students and to national minimum subsistence allowance, the Court ruled that

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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 the same treatment in law irrespective of their nationality, subject to such exceptions as are expressly provided for. (emphasis added) ... a citizen of the European Union, lawfully resident in the territory of a host Member State, can rely on Article [18 TFEU] in all situations which fall within the scope ratione materiae of [Union] law. (paras 31–32)

Case C-413/99 Baumbast and R v Secretary of State for the Home Department [2002] ECR I-7091 is a good illustration of what European citizenship as a fundamental status actually means. Mr Baumbast was a German migrant worker in the UK where he met and married his Colombian wife in 1990. They had two daughters: the elder one was Mrs Baumbast’s daughter from an earlier relationship and had Colombian nationality; the second daughter had dual German and Colombian nationality. The family was granted a residence permit valid for five years until 1995. While initially Mr Baumbast was a worker and then a self-employed person, he was later on engaged on temporary contracts by German companies in China and Lesotho following his own company’s failure. At different times, he had sought work in the United Kingdom but without success. During that time, the couple owned a house on a mortgage and the children attended school in the United Kingdom. The family never had recourse to public funds and had comprehensive medical insurance in Germany. In 1995, the Baumbasts applied for indefinite leave to remain in the UK, but their application was turned down by the Secretary of State. While the British authorities recognised that the children had a right of residence under Article 12 of Regulation No 1612/68 (now Article 10 of Regulation 492/2011, see 15.4.2 and 15.4.3) and that Mrs Baumbast had a right to stay in connection with the right of residence of her children, Mr Baumbast was refused leave to stay as he was no longer a worker and was not insured in the UK. Before the Court of Justice, in the preliminary procedure (see Chapter 9), the British Government notably argued that, where a host Member State has a duty to allow children to reside on its territory in order to attend general educational courses under Article 12 of Regulation 1612/68, such duty may not be interpreted as requiring that State to allow the person who is their carer to reside with them. Should refusal of the right of residence to the carer interfere with family life as protected by Article 8 ECHR, the Home Office might grant that parent exceptional leave to remain in derogation from the British Immigration Rules. The Court responded that to refuse to grant permission to remain to a parent as primary carer of the child exercising his right to pursue his studies in the host Member State would infringe that right. Article 12 of Regulation 1612/68 must therefore be interpreted as

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… 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 parent who has the status of citizen of the European Union has ceased to be a migrant worker in the host Member State. (para 75) Furthermore, the British Government argued that a right of residence could not be derived directly from former Article 18(1) TEC (now Article 21(1) TFEU) and that the limitations and conditions referred to in that paragraph showed that it was not intended to be a free-standing provision (para 78). Again, the Court did not embrace this narrow interpretation of that provision, pointing out that [a]lthough, before the Treaty on European Union entered into force, the Court had held that that right of residence, conferred directly by the [former] EC Treaty, was subject to the condition that the person concerned was carrying on an economic activity … it is none the less the case that, since then, Union citizenship has been introduced into the [then] EC Treaty and Article 18(1) EC [now Article 21(1) TFEU] has conferred a right, for every citizen, to move and reside freely within the territory of the Member States. (para 81) Reaffirming that ‘Union citizenship is destined to be the fundamental status of nationals of the Member States’ (para 82), the Court stated that the Treaty on European Union does not require that EU citizens pursue a professional or trade activity in order to enjoy the rights deriving from European citizenship. Nor does it provide that EU nationals should be deprived of their rights as EU citizens after their professional activity has come to an end (para 83). Most importantly, the Court came to the conclusion that … 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 [21(1) TFEU]. 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 [Union] law and, in particular, the principle of proportionality. (para 94, emphasis added) Not only did Mr Baumbast have a right of residence derived from his children’s right to a general education in the host Member State (see also in this respect Case C-480/08 Teixeira v London Borough of Lambeth and Secretary of State for the Home Department [2010] ECR I-1107 and Case C-310/08 London Borough of Harrow v Nimco Hassan Ibrahim and Secretary of State for the Home Department [2010] ECR I-1065, see 20.3), but he also had a general right of residence as an EU citizen, irrespective of pursuing an economic activity or not, ‘conferred directly on every citizen of the Union by [the] clear and precise provision of [Article 21(1) TFEU]’ (para 84). The fundamental status as European citizen can also protect EU nationals against discrimination in areas of law that are normally regarded as the exclusive domain of national law, such as rules on patronymic surnames, insofar as such discrimination does not occur in purely internal situations with no link with EU law (Joined Cases C64/96 and C-65/96 Land Nordrhein-Westfalen v Uecker and Jacquet v Land NordrheinWestfalen [1997] ECR I-3171, para 23). Such a link existed in Case C-148/02 Carlos Garcia Avello v Belgium [2003] ECR I-11613. In this case, children who had dual

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Spanish and Belgian nationality were prevented under Belgian law from changing their patronymic surnames from Garcia Avello to Garcia Weber, in accordance with the wellestablished usage in Spanish law whereby the surname of children of a married couple consists of the first surname of the father followed by that of the mother, on the ground that in Belgium children take the name of their father. The Court of Justice found that the Belgian law and administrative practice on the change of patronymic surnames constituted discrimination on ground of nationality contrary to former Article 12 TEC (now Article 18 TFEU) (para 45). Such a link also existed in the recent Case C-541/15 Proceedings brought by Mircea Florian Freitag EU:C:2017:432, in which a German national and resident who also held Romanian nationality was refused recognition by the German authorities of a change of name from Freitag to Pavel lawfully made by the competent Romanian authorities on the ground that the name in question must have been acquired during a period of habitual residence in Romania. The Court found that such requirement was contrary to Article 21 TFEU since ‘it is likely to hinder the exercise of the right, enshrined in [that article], to move and reside freely in the territories of the Member States’ (para 39). Citizenship of the Union has not been used, however, to extend the scope of Article 21 TFEU to prevent a Member State from refusing to recognise the patronymic surname of one of its citizens which included a title of nobility acquired by means of adoption by a citizen from another EU Member State who was permitted to bear that title as a constituent element of his name (see Case C-208/09 Sayn-Wittgenstein v Landeshauptmann von Wien [2010] ECR I-13693, para 95). The concept of European citizenship took a new turn in the recent case law of the Court with a new emphasis on national measures depriving EU citizens of the genuine enjoyment of the substance of their rights attaching to their status of European citizens.

se

ca ple This approach was first developed in Case C-34/09 Ruiz Zambrano v Office national de m exa l'emploi (ONEm) [2011] ECR I-1177. Mr Zambrano and his wife, both of Columbian nationality, fled the civil war in Columbia to Belgium where they applied for asylum. Their application was rejected and they were ordered to leave Belgium. While residing in Belgium during the processing of their application, their first two children were born in Belgium and acquired Belgian nationality. Despite having no work permit, Mr Zambrano was employed full time by a Belgium company and had sufficient resources to provide for his family. Following periods of unemployment, Mr Zambrano applied for unemployment benefit. Although he had contributed to social security, his claim was rejected on the ground that he did not meet the Belgian foreigners’ residence requirements and was not entitled to work in Belgium. The Zambranos also applied for residence in Belgium as parents of Belgian nationals, but their application was rejected on the ground that they deliberately failed to have their children recognised as Columbian citizens, a necessary step prior to regularising their own residence in Belgium. Mr Zambrano challenged the refusal of his applications for residence and unemployment benefit before a Belgian labour court on the ground that he was entitled to reside and work in Belgium as a parent and carer of minor children holding Belgian nationality. The Court of Justice observed first that, since Mr Zambrano’s children possessed Belgian nationality, Article 20 TFEU confered upon them the status of citizen of the Union, and secondly that … Article 20 TFEU precludes national measures which have the effect of depriving citizens of the Union of the genuine enjoyment of the substance of the rights conferred by virtue of their status as citizens of the Union … (para 42, emphasis added)

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Considering that the refusal to grant a right of residence to Mr Zambrano upon whom his minor children were dependent would result in the children having to leave the EU in order to accompany their parents, and, equally, that the refusal to grant Mr Zambrano a work permit would mean running the risk of him not having sufficient resources to support his family and forcing them to leave the EU, the Court concluded that Article 20 TFEU is to be interpreted as meaning that it precludes a Member State from refusing a third country national upon whom his minor children, who are European Union citizens, are dependent, a right of residence in the Member State of residence and nationality of those children, and from refusing to grant a work permit to that third country national, in so far as such decisions deprive those children of the genuine enjoyment of the substance of the rights attaching to the status of European Union citizen. (para 45)

It was argued by other Governments and by the European Commission which submitted observations to the Court in this case that the situation of Mr Zambrano’s children who resided in Belgium and had never left its territory was not covered by the provisions on freedoms of movement and residence guaranteed under EU law. In other words, such a situation was a purely internal one. However, while Directive 2004/38/EC on the right of citizens of the Union and their family members to move and reside freely within the territory of the Member States ([2004] OJ L158/77) (see 20.1) did not apply to such a situation (para 39), Article 20 TFEU did, despite the lack of crossborder movement. This new concept of ‘genuine enjoyment of the substance of rights’ was seized upon by Mrs McCarthy in Case C434/09 McCarthy v Secretary of State for the Home Department [2011] ECR I-3375. Mrs McCarthy was a UK national who was born and has always resided in the UK. She never exercised her rights of free movement and residence in other EU Member States. After marrying a Jamaican national, she applied for and obtained an Irish passport. She then applied for a residence permit in the UK as an Irish national. Her husband also applied for a residence permit as the spouse of an EU citizen. Both applications were refused on the ground that Mrs McCarthy had never exercised her right to move and reside in Member States other than the UK. First, the Court ruled that Directive 2004/38/EC could not apply to EU citizens in the situation of Mrs McCarthy who reside in the Member State of which they are a national since they enjoy an unconditional right of residence in that State. The Court also noted that being the national of more than one Member State does not entail that the EU national has made use of the right of free movement. Therefore, the Court found that someone in Mrs McCarthy’s situation could not rely on the Directive. Furthermore, the Court observed that, although a person such as Mrs McCarthy enjoys the status of a Union citizen under Article 20(1) TFEU, the refusal by the British authorities to grant her a residence permit in the UK on the basis of her Irish nationality did not have the effect of depriving her of the genuine enjoyment of the substance of the rights associated with her status as a Union citizen, or of impeding the exercise of her right to move and reside freely within the territory of the Member States, in accordance with Article 21 TFEU … (para 49) According to the Court, Mrs McCarthy was not put in the same situation as the Zambrano children who would have been obliged to leave the EU (para 50). Rather, her situation had no factor linking it with EU law and was covered exclusively by national law.

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Case C256/11 Dereci and Others v Bundesministerium für Inneres [2011] ECR I11315 gave the Court another opportunity to clarify the conditions of application of Article 20 TFEU and the concept of ‘substance of rights’. In this case, the applicants were all third country nationals who wished to live with their family members, who were Austrian nationals, and therefore EU citizens, resident in Austria. The latter had, however, never exercised their right to free movement and were not maintained by the applicants. All applicants had their applications for residence permits in Austria rejected and some of them were subject to expulsion orders. Confirming its rulings in Zambrano and McCarthy, the Court specified that … the criterion relating to the denial of the genuine enjoyment of the substance of the rights conferred by virtue of European Union citizen status refers to situations in which the Union citizen has, in fact, to leave not only the territory of the Member State of which he is a national but also the territory of the Union as a whole. (para 66, emphasis added) The fact that it might be desirable to EU nationals that their family members who are third country nationals reside with them within an EU Member State ‘is not sufficient in itself to support the view that the Union citizen will be forced to leave Union territory if such a right [of residence] is not granted’ to those family members (para 68). In other words, as long as EU citizens are not deprived of the option of living with their non-EU family members in another Member State, Article 20 TFEU is not breached. This criterion clearly draws the line between the McCarthy and the Dereci cases on the one hand and Zambrano on the other. The clarification made by the Court in Dereci was confirmed in subsequent cases such as Case C-40/11 Iida v Stadt Ulm EU:C:2012:691 (a Japanese national who could not claim a right of residence in Germany derived from the right of his two children as Union citizens who had moved with their mother to Austria); Joined Cases C-356/11 and C-357/11 O and S v Maahanmuuttovirasto and Maahanmuuttovirasto v L EU:C:2012:776 (Mr O, an Ivorian national, sought to reside in Finland with his spouse, Mrs S, a Ghanaian national and lawful resident in that State, and with their Ghanaian child. Mrs S was also the mother of a child from a previous marriage who had Finnish nationality. The Finnish authorities’ refusal to grant Mr O a residence permit on the basis of family reunification was not deemed to be in breach of Article 20 TFEU); Case C-87/12 Ymeraga and Others v Ministre du Travail, de l’Emploi et de l’Immigration EU:C:2013:291 (refusal by Luxembourg to grant residence permits to Kosovan nationals who wished to reside with a family member residing in Luxembourg and holding Luxembourg nationality but who had never exercised his free movement rights as a Union citizen); and Case C-86/12 Alokpa and Others v Ministre du Travail, de l’Emploi et de l’Immigration EU:C:2013:645 (Luxembourg’s refusal to grant a residence permit to a Togolese woman who had sole care for her twin minor children who were granted French nationality as a result of their father’s nationality, and who had resided with her in Luxembourg since their birth, but without possessing Luxembourg nationality and making use of their free movement rights). As Koen Lenaerts, President of the CJEU, persuasively explained (in ‘EU Citizenship and the European Court of Justice's “Stone-by-Stone” Approach’ (2015) 1 International Comparative Jurisprudence 1 at 9), The sequence of these cases demonstrates that the new approach set out in Ruiz Zambrano has been built up progressively, i.e., on a ‘stone-by-stone’ basis. Indeed, Dereci, Iida, Ymeraga and Alokpa make clear that the new approach only operates

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under exceptional circumstances, namely insofar as the contested national measure forces EU citizens to leave the territory of the Union, depriving them of ‘the genuine enjoyment of the substance of the rights conferred by virtue of their status as citizens of the Union’ ... If Ruiz Zambrano is examined in a vacuum, the discourse of the ECJ, in that case, was arguable … too Cartesian. ... However, if those eight cases are examined together, the same does not hold true. On the contrary, the way in which the ECJ built up its legal reasoning is rather similar to the way a common law court operates. Indeed, Rottmann, Ruiz Zambrano, McCarthy, Dereci, Iida, O and S, Ymeraga and Alokpa show that ‘the life of the law [on EU citizenship] has not been logic: it has been experiencing’ … This stone-by-stone approach operating under exceptional circumstances is further confirmed in more recent cases. In Case C-165/14 Rendón Marín v Administración del Estado EU:C:2016:675 and Case C-304/14 Secretary of State for the Home Department v CS EU:C:2016:674, two non-EU nationals were refused a residence permit by Spain (Rendón Marín) and served with a deportation order by the UK (CS) because of their criminal records. The respective host States were also States of nationality of minor children of whom the applicants had sole care and who possessed citizenship of the Union. Mr Rendón Marín was the sole carer of a son who held Spanish nationality and a daughter who had Polish nationality. Both children had always resided in Spain. For her part, CS was the mother and sole carer of her British child who resided with her in the UK. The Court first explained that, as Directive 2004/38 applies to EU citizens and their family members who have exercised their free movement rights, it did apply to the situation of Mr Rendón Marín and his Polish daughter who would therefore qualify for a right of residence under the Directive. However, the Directive did not apply to his situation with his Spanish son or to that of CS and her son of British nationality as these children have always resided in Spain and the UK, Member States of which they were nationals respectively. Nonetheless, as EU citizens, these two children would qualify under Article 20 TFEU for the right to move and reside freely within the territory of the Member States. Refering to para 42 of the Zambrano ruling, the Court first firmly restated that Article 20 TFEU ‘precludes national measures which have the effect of depriving Union citizens of the genuine enjoyment of the substance of the rights conferred by virtue of their status as Union citizens’ (Rendón Marín, para 71, and CS, para 26), before confirming that such deprival would occur where a minor EU citizen in the sole care of a non-EU parent would be obliged to go with his parent and leave the territory of the EU as a consequence of that parent being automatically refused a residence permit or be deported on the sole ground that he has a criminal record (Rendón Marín, para 87 and CS, para 50). However, the Court also reiterated that the exercise of the right of residence by EU citizens or their family members either under the Directive or under the Treaty can be limited on grounds, notably, of public policy or public security under strict compliance with the European Charter of Fundamental Rights (see 4.6.1), the principle of proportionality and the conditions spelled out in Articles 27 and 28 of Directive 2004/ 38 (see 20.5)

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By treating the situation of the daughter and that of the son separately in Rendón Marín, the Court confirms that a Union citizen in a host Member State must first rely on Article 21 TFEU or secondary law before Article 20 TFEU can be applied (see Case C115/15 Secretary of State for the Home Department v NA EU:C:2016:487, para 72: a Pakistani national mother who lived in the UK with her German national children who had a corollary right of residence under Article 12 of Regulation 1612/68 (now Article 10 of Regulation 492/2011) which guarantees children of current and former workers the right to access to education in the host Member State). Article 20 TFEU and the Ruiz Zambrano protection applies only if there is no derived right under Article 21 TFEU or secondary EU law (Rendón Marín, para 68). This point is further confirmed in the more recent Case C-133/15 Chavez-Vilchez and Others EU:C:2017:354, paras 48–57). However, apart from this point, the interest of Chavez-Vilchez and Others lies in the fact that it not only reaffirms the Zambrano ruling but expands it. It not only confirms the powerfulness of the Zambrano protection and the genuine enjoyment rule under Article 20 TFEU, it also further highlights that safeguarding the best interests of the EU child is paramount, a point already more visible in Rendón Marín and CS. Chavez-Vilchez concerned eight different mothers who were third country nationals and residing in the Netherlands with their Dutch national children. Although none of them had a valid residence permit, they were not the subject of deportation measures. The children had all been recognised by their Dutch fathers but lived mainly or exclusively with their mothers. Apart from the Chavez-Vilchez child who lived with her two parents in Germany for two years, none of the other minor EU citizens had ever made use of their EU free movement rights since they had resided from birth in the Netherlands. There were also differences with respect to the relationships between fathers and children, which varied from no contact to almost daily contact, and with regard to financial support varying from no to limited financial contribution. The applicants brought court proceedings against the refusal by the Dutch authorities to grant them social assistance and child benefit on the ground that they were not lawful residents in the Netherlands. Also, from the explanations given by the referring court, it was clear that the applicants were facing a strict and narrow interpretation of the Zambrano case law by the Dutch administrative bodies in that it was ‘applicable only in situations where the father is not, on the basis of objective criteria, in a position to care for the child because he is, for example, in prison, confined to an institution or hospitalised, or even dead. Other than in such situations, it is for the third-country national parent to establish a plausible case that the father is incapable of caring for the child, even with the possible assistance of third parties’ (para 36). Furthermore, the authorities regarded the following factors as irrelevant: the fact that it was the mother, a non-EU national, rather than the father, an EU citizen, who was responsible for the primary day-to-day care of the child; the nature of contact between the child and father; the father’s financial contribution towards the support and upbringing of the child; the willingness of the father to take care of the child; and the fact that the father had no rights of custody with respect to the child where no plausible case had been made that rights of custody could not be awarded to him (see para 37). After recalling its holding on Article 20 TFEU (paras 61–64), the Court restated that it was for the Dutch court to determine whether the children could be deprived of the genuine enjoyment of the substance of those rights by compelling those children to leave the territory of the EU if their mothers were compelled to leave the territory of the EU (para 65). For the purpose of this assessment, the Court recalled that ‘factors of relevance … include the question of who has custody of the child and whether that

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child is legally, financially or emotionally dependent on the third-country national parent’ (para 68 and O v S, para 56). Such assessment must take account of the right to respect for family life under Article 7 of the European Charter of Fundamental Rights and give consideration to the best interests of the child under Article 24(2) of the Charter (para 70). While the Court conceded that the fact that the other EU citizen parent is actually able and willing to assume sole responsibility for the primary day-to-day care of the child is a relevant factor, it is not in itself a sufficient one to conclude that there is no relationship of dependency between the child and the third-country national parent and that the child would not be compelled to leave the territory of the EU should a right of residence be refused to the third-country parent (para 71). To reach such conclusion, the child’s best interests, age, physical and emotional development and the extent of his or her emotional ties to both EU and non-EU parents and the risks that the separation from the latter parent might entail for the child’s equilibrium have to be considered (para 71). Finally, while the national authorities may require that the non-EU parent carry the burden of proof in providing evidence on the basis of which that overall assessment can be made, this burden of proof cannot undermine the effectiveness of Article 20 TFEU (para 76) and does not relieve the national authorities of the obligation to undertake, on the basis of the evidence provided by the third-country national, the necessary inquiries to determine whether the child could potentially be deprived of his or her ‘genuine enjoyment’ right (para 77). The existence of a relationship of dependency capable of justifying a derived right of residence under Article 20 TFEU was particularly salient in Case C-82/16 KA and Others v Belgische Staat EU:C:2018:308. In this case, the Court ruled that the practice of the Belgian State that consisted in not examining an application for residence for the purposes of family reunification, submitted by third-country nationals who were family members of Union citizens who were Belgian but had never exercised their right of freedom of movement, solely on the ground that those third-country nationals were the subject of a ban on entering Belgium, was contrary of Article 20 TFEU. That practice was indeed carried out without any examination as to whether there was a relationship of dependency between the Union citizens and the third-country nationals concerned, and therefore it could lead to the Union citizens being, in practice, compelled to leave the territory of the European Union and thereby being deprived of the genuine enjoyment of the substance of their rights as Union citizens in the event that the third-country nationals were not granted a derived right of residence (para 62). The third-country nationals concerned who had been ordered to return to their respective countries and had been banned from re-entering Belgium, primarily on grounds of a threat to public policy, submitted an application for a residence permit on the basis of their status as either a dependent relative in the descending line of a Belgian citizen (Mrs KA, an Armenian citizen, and Mr MZ, a Russian national), the parent of a minor Belgian child (Mrs RI, an Albanian citizen, Mrs MJ from Uganda, Mrs NNN, a Kenyan citizen, and Mr OIO from Nigeria) or a lawfully cohabiting partner in a stable relationship with a Belgian citizen (Mr BA from Ghana) (see paras 19–26). Following a factual analysis of the existence of a relationship of dependency in the main proceedings under paras 64 to 70 (thus departing from the cardinal rule of separation between interpretation of EU law and application to the facts of the case in preliminary reference cases, see 9.2.2), the Court reiterated the parameters of the

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assessment regarding the relationship of dependency to be carried out by the national authorities or courts as explained in paras 70 and 71 of the Chalvez-Vilchez case (see above, paras 71–72). Returning to the terrain of principles, the Court then concluded without great surprise that … Article 20 TFEU must be interpreted as meaning that: • where the Union citizen is an adult, a relationship of dependency, capable of justifying the grant to the third-country national concerned of a derived right of residence under Article 20 TFEU, is conceivable only in exceptional cases, where, in the light of all the relevant circumstances, any form of separation of the individual concerned from the member of his family on whom he is dependent is not possible; • where the Union citizen is a minor, the assessment of the existence of such a relationship of dependency must be based on consideration, in the best interests of the child, of all the specific circumstances, including the age of the child, the child’s physical and emotional development, the extent of his emotional ties to each of his parents, and the risks which separation from the third-country national parent might entail for that child’s equilibrium. The existence of a family link with that third-country national, whether natural or legal, is not sufficient, and cohabitation with that third-country national is not necessary, in order to establish such a relationship of dependency. (para 76)

European citizenship (Arts 9 TEU and 20 TFEU) Additional to national citizenship

European citizenship as the fundamental status of nationals of Member States C-184/99 Grzelczyk

A national measure may not deprive a European citizen from the genuine enjoyment of the substance of the rights conferred by the status of European citizen C-34/09 Zambrano

Figure 19.1 European citizenship

19.3.2 The political rights of European citizens As recognised by international law, the right for citizens to participate in public affairs through the right to vote or to stand at national elections is usually reserved to the nationals of a State. The extension of this right to other EU nationals residing in a Member State other than their own constitutes an essential element of European citizenship and considerable progress towards European integration. Political citizenship has developed at European level – through the European Parliament elections and the creation of the European citizens’ initiative under the Lisbon Treaty – and at national level – through the right to vote and to stand at municipal elections. 19.3.2.1

The right to vote and to stand at European and municipal elections The right to vote and to stand at European elections is aimed at increasing European citizens’ participation in European affairs and at reducing the democratic deficit within the EU. It was under the Decision of the representatives of the Member States meeting in the Council of 20 September 1976 relating to the Act concerning the election of the representatives of the Assembly by direct universal suffrage (76/787/ECSC, EEC,

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Euratom) ([1976] OJ L278/1) that European nationals were granted the right to directly elect their representatives in the European Parliament every five years as from 1979. Although this was a major step towards the democratisation of the then EEC, it was not until the adoption of the Maastricht Treaty on European Union that this right was extended to EU nationals residing in a Member State other than their own. Until then, with the exception of a few countries, this right to vote and stand at European elections was the exclusive right of the nationals of each Member State. Under Article 22(2), first sentence TFEU (formerly Article 8b(2) TEC postMaastricht): Without prejudice to Article 223(1) and to the provisions adopted for its implementation, every citizen of the Union residing in a Member State of which he is not a national shall have the right to vote and to stand as a candidate in elections to the European Parliament in the Member State in which he resides, under the same conditions as nationals of that State. The detailed arrangements for the exercise of those rights were laid down in Council Directive 93/109/EC as amended ([1993] OJ L329/34). The principle is simply that Union citizens have the right to take part in European elections as a voter and/or candidate under the same conditions as the nationals of their State of residence provided that they satisfy the conditions set out in Articles 3 (being an EU national and not being a national of the country of residence) and 6 (condition of residence) of the Directive. As such, these rights cannot be denied by a Member State to its own nationals living in that State’s overseas countries and territories (see Case C300/04 Eman and Sevinger v College van burgemeester en wethouders van Den Haag [2006] ECR I-8055: requirement of residence in the Netherlands for Dutch citizens of Aruba). Under Article 4 of the Directive, EU citizens can choose to exercise this right in either the country of origin or of residence but can exercise it in one of them only. A citizen who has been deprived, through an individual criminal law or civil law decision, of the right to stand at elections in either the home or the host country is precluded from exercising that right in the Member State of residence in European elections (Article 6). Any citizen who has been deprived of the right to vote in the home country (such ban on voting in European Parliament elections may be maintained indefinitely by a Member State for certain nationals of that State provided it is proportionate to the aim pursued – see Case C-650/13 Delvigne v Commune de Lesparre-Médoc and Préfet de la Gironde EU:C:2015:648: a person convicted of a serious criminal offence who was automatically and permanently deprived of civic rights) may also be deprived of that right in the country of residence (Article 7). The right to vote and to stand as a candidate in municipal elections is the second political right created under the Maastricht Treaty. This right may be regarded as a major means to foster the integration of EU nationals in their new country of residence. It is enshrined in Article 22(1) TFEU (formerly Article 8b(1) TEC post-Maastricht). The detailed arrangements for the exercise of those rights are laid down in Council Directive 94/80/EC as amended ([1994] OJ L368/38). This Directive follows the same pattern as that of the 1993 Directive on European elections and provides in its annex a list of the ‘basic local government units’, the bodies which are elected by direct suffrage and administer local affairs. In the UK, these would include the London boroughs, counties, districts and parishes in England; counties, county boroughs and communities in Wales; regions, districts and Islands in Scotland; and districts in Northern Ireland.

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In contrast with European elections, EU nationals exercising their right to vote and to stand as a candidate in municipal elections in the Member State of residence do not lose the right to vote and to stand as a candidate in their own Member State (see recital 6 of the preamble to the Directive). 19.3.2.2

The European citizens’ initiative The European citizens’ initiative (ECI) (see 2.2.1) is a recent creation of the unratified Treaty establishing a constitution for Europe of 2005 and incorporated into the Lisbon Treaty. It gives European citizens the right to take part in the law-making process of the Union by taking the initiative of inviting the Commission to propose new EU legal acts within a specific legal framework. Although very similar to the popular initiative, a direct democracy instrument which enables citizens in certain countries, like Switzerland, to suggest new laws, the European citizens’ initiative is much more limited. Under Title II on Provisions on democratic principles, Article 11(4) TEU provides: Not less than one million citizens who are nationals of a significant number of Member States may take the initiative of inviting the European Commission, within the framework of its powers, to submit any appropriate proposal on matters where citizens consider that a legal act of the Union is required for the purpose of implementing the Treaties. The procedures and conditions required for such a citizens’ initiative shall be determined in accordance with the first paragraph of Article 24 of the Treaty on the Functioning of the European Union. And according to this provision (Part Two of the TFEU on Non-discrimination and citizenship of the Union, Article 24, first paragraph): The European Parliament and the Council, acting by means of regulations in accordance with the ordinary legislative procedure, shall adopt the provisions for the procedures and conditions required for a citizens’ initiative within the meaning of Article 11 of the Treaty on European Union, including the minimum number of Member States from which such citizens must come. It was on the basis of the latter provision that Regulation 211/2011/EU on the citizens’ initiative ([2011] OJ L65/1) was adopted to specify the procedures and conditions required for a citizens’ initiative. Following the Commission Report on the application of the regulation of 31 March 2015 (COM(2015) 145 final) listing a number of challenges arising in its implementation and the call for its review by the European Parliament in its resolution of 28 October 2015, the 2011 Regulation was repealed and replaced by Regulation (EU) 2019/788 on the European citizens’ initiative ([2019] OJ L130/55). Article 11(4) TEU sets out two series of conditions: (a) First, the initiative must concern matters falling within the scope of application of the Treaties and within the framework of the powers of the European Commission. This is reflected in Article 1 of the 2019 Regulation which, further specifying its scope of application, provides that it establishes the procedures and conditions required for an initiative inviting the Commission, within the framework of its powers, to submit any appropriate proposal on matters where citizens of the Union consider that a legal act of the Union is required for the purpose of implementing the Treaties.

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(b) Secondly, the initiative must be supported by at least one million citizens who are nationals of a significant number of Member States. To guarantee sufficient representation of European citizens, Article 2(1) of the 2019 Regulation provides that every Union citizen who is at least of the age to be entitled to vote in elections to the European Parliament has the right to support an initiative by signing a statement of support. The minimum age entitling the support of an initiative might be set at 16 by Member States. Article 2(2) also provides that Member States and the Commission must guarantee that disabled persons can exercise such right. Further, Article 3 of the Regulation lays down a dual condition: (a) the initiative must receive the support of at least one million Union citizens from at least one quarter of the Member States (Article 3(1) and recital 8); and (b) at the time of the registration of the initiative, the number of signatories must be equal to or more than the minimum number of citizens set out for each EU Member State in Annex 1 of the Regulation. This number is calculated on the basis of the number of the MEPs elected in each Member State multiplied by their total number (Article 3(2)). The procedure established under the Regulation is designed to make the European citizens’ initiative ‘more accessible, less burdensome and easier to use for organisers and supporters, and to strengthen its follow-up in order to achieve its full potential as a tool to foster debate … [and] facilitate the participation of as many citizens as possible in the democratic decision-making process of the Union’ (recital 5). For that reason, Article 5 requires the organisers of the initiative to set up a citizens’ committee of at least seven persons who are residents of at least seven different Member States, and Article 6(1) requires that the proposed initiative be registered with the Commission prior to collecting statements of support from signatories. This enables the Commission to verify that the initiative meets the main requirements, notably that the initiative is not manifestly abusive, frivolous or vexatious and is not contrary to the values of the Union (Article 6(3)) and that it falls within the framework of the Commission’s powers to submit a proposal for an EU act (see the first ECIrelated Case T-450/12 Anagnostakis v European Commission EU:T:2015:739, in which the General Court, dismissing the action of Mr Agagnostakis, confirmed that the Commission did not have the power to propose EU legislation enshrining the principle that it should be possible to cancel the onerous public debt of countries in a state of necessity; this was confirmed on appeal by the Court of Justice in Case C-589/15 Anagnostakis v European Commission EU:C:2017:663. By contrast, see Case T-754/14 Efler and Others v European Commission EU:T:2017:323, in which the General Court annulled the Commission decision refusing the registration of the proposed European citizens’ initiative ‘Stop TTIP’). Assessing whether the measure proposed in connection with a citizens’ initiative is within the framework of the Commission’s powers is not a question of fact or of the assessment of evidence subject to the rules on the burden of proof, but essentially a question of interpretation and application of the provisions of the Treaties (see Case C-420/16 Balázs-Árpád Izsák and Attila Dabis v European Commission EU:C:2019:177, para 61, setting aside the judgment of the General Court in Case T-529/13 EU:T:2016:282). Once the proposed initiative has been registered and made public, signatures and statements of support can be collected in paper form or online (through a central online or individual online collection systems) (Articles 9, 10 and 11) within 12 months from the date chosen by the organisers and no later than six months from the

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registration of the initiative (Article 8). If the minimum number of signatures and statements of support required is reached, the proposed initiative will undergo a process of verification and certification by national authorities (Article 12). It is only then that the proposed initiative is submitted to the Commission for examination (Articles 13, 14 and 15), at which stage the group of organisers must be given an opportunity to present its initiative at a public hearing organised and held by the European Parliament (Article 14(2)) and must be received by the Commission ‘at an appropriate level to allow it to explain in detail the objectives of the initiative’ (Article 15(1)) before the Commission can set out in a communication ‘its legal and political conclusions on the initiative, the action it intends to take, if any, and the reasons for taking or not taking action’ (Article 15(2)). Setting out the reasons for the refusal of registration of an initiative is particularly important as illustrated in Case T-646/13 Bürgerausschuss für die Bürgerinitiative Minority SafePack – one million signatures for diversity in Europe v European Commission EU:T:2017:59, where the General Court annulled the Commission decision refusing registration of the proposed European citizens’ initiative on the ground that it failed to indicate which of the measures among those set out in the annex to the proposed initiative did not come within its competence and by not setting out the reasons in support of that conclusion. However, the exercise of the right to the European citizens’ initiative cannot be interpreted as requiring the Commission to submit a proposal for a legal act as this would result in the Commission being stripped of all discretion in exercising its powers of legislative initiative following a European citizens’ initiative, thus undermining the principle of institutional balance (see Case T-561/14 European Citizens' Initiative One of Us and Others v European Commission EU:T:2018:210, paras 109–116 as confirmed by the Court of Justice in Case C-418/18 Puppinck and Others v European Commission EU:C:2019:1113, paras 60, 65 and 71). According to the Commission’s Report on the application of Regulation (EU) No 211/2011, since April 2012, 51 requests for registration of proposed citizens’ initiatives were made, of which 31 were registered and 18 had reached the end of their collection period. At the time, only three initiatives reached the required number of statements of support and were submitted to the Commission: ‘Right2Water’ (call for legislation implementing the human right to water and sanitation), ‘One of us’ (call to end the financing of activities which presuppose the destruction of human embryos) and ‘Stop vivisection’ (call for the abrogation of Directive 2010/63/EU on the protection of animals used for scientific purposes), all of which received a formal response from the Commission. The Commission responded positively to the first initiative on 19 March 2014 (COM(2014) 177 final) but negatively to the second one on 28 May 2014 (COM(2014) 355 final) and to the third one on 3 June 2015 (C(2015) 3773 final). To date, out of 98 requests for registration, 74 initiatives were registered, of which 11 are ongoing. Since the publication of the Commission’s Report, only one initiative – ‘Ban glyphosate and protect people and the environment from toxic pesticides’ – was successful, though with regard to its second aim only – ‘Ensure that the scientific evaluation of pesticides for EU regulatory approval is based only on published studies, which are commissioned by competent public authorities instead of the pesticide industry’ – (COM(2017) 8414 final of 12 December 2017), resulting in the Commission making a proposal for a Regulation on the transparency and sustainability of the EU risk assessment in the food chain (COM(2018) 179) on the

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basis of which Regulation (EU) 2019/1381 was adopted on 20 June 2019 ([2019] OJ L231/1).

19.3.3 The legal protective rights of European citizens Besides the right of free movement and residence (see 20.2 and 20.3) and the political rights discussed above, the TEU and TFEU also include four major protective rights within the concept of European citizenship, the first three having been introduced by the 1992 Maastricht Treaty and the last one by the 1997 Amsterdam Treaty. Of a different nature, the first one (right to diplomatic and consular protection) is to be implemented by Member States, while the other three fall within the competence of the Union. 19.3.3.1

The right to diplomatic and consular protection Article 23, first paragraph TFEU simply provides: Every citizen of the Union shall, in the territory of a third country in which the Member State of which he is a national is not represented, be entitled to protection by the diplomatic or consular authorities of any Member State, on the same conditions as the nationals of that State. This is an important protection since many EU nationals travel outside the European Union (from 80 million trips in 2005 to over 90 million in 2008 according to the Commission EU Citizenship Report 2010, Dismantling the obstacles to EU citizens’ rights (COM(2010) 603 final) at 9) and/or live in a third country (30 million, ibid), yet the totality of the EU Member States have full diplomatic representation in only five non-EU States (China, Japan, Russia, Switzerland and the United States). There is therefore an increasing need for consular assistance of unrepresented EU nationals. Reiterated in Article 46 ECFR, this right can only be guaranteed by national authorities and covers both diplomatic and consular protection in accordance with public international law, notably the Vienna Conventions of 18 April 1961 and 24 April 1963. Since the third State in which this right is exercised is not bound by it, Article 23, first paragraph, second sentence provides that ‘Member States shall adopt the necessary provisions and start the international negotiations required to secure this protection’. Unfortunately, very little has been done in this domain, and according to the Commission in its 2010 report, [t]he effectiveness of EU citizens’ right to consular protection remains to be proven. Even though there is a lack of systematic data, it is clear from complaints and reported cases that EU citizens and, at times, consular officials, are not yet sufficiently aware that EU citizens have the right to turn to other embassies or consulates and are not sure what kind of help can be given. (at 10) On 14 December 2011, the Commission adopted a proposal for a Directive on consular protection for Union citizens abroad, with the view to establishing ‘clear and legally binding rules on cooperation and coordination between Member States’ consular authorities to ensure that unrepresented EU citizens have non-discriminatory access to protection from other Member States’ diplomatic or consular representations in a third country’ (Commission report, On progress towards effective EU Citizenship 2011-2013 (COM(2013) 270 final) at 7). Yet, it took until 20 April 2015 for Directive 2015/637/EU on the coordination and cooperation measures to facilitate consular

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protection for unrepresented citizens of the Union in third countries and repealing Decision 95/553/EC ([2015] OJ L106/1) to be adopted. It clarifies the conditions under which EU nationals in distress in a third country can exercise their right to receive assistance from other EU countries’ embassies or consulates. It is also designed to facilitate cooperation between national consular authorities and reinforce EU nationals’ right to consular protection. 19.3.3.2

The right to petition the European Parliament The right to petition is the right to make representations to a political institution in order either to prevent an unjust situation from occurring or to make it cease. Recognised in many parliamentary democracies, this right is unequally exercised and implemented. Introduced by the Maastricht Treaty, this right is enshrined in Article 24 TFEU and Article 44 ECFR. Article 24, second paragraph TFEU states that ‘[e]very citizen of the Union shall have the right to petition the European Parliament in accordance with Article 227’ on Union matters which affect them directly. The procedure and the conditions for petition are very loose as a petition may be sent to the European Parliament’s Committee on Petitions in writing by post or electronically in one of the official languages of the EU. The petition may be an individual or a collective one. Of the 1,746 petitions that were received in 2010, the 2,091 in 2011 and the 1,964 in 2012, 60%, 71% and 72% respectively were declared inadmissible; those that were admissible were either referred to an institution or body or closed with a direct reply to the petitioner. (See Commission report, On progress towards effective EU Citizenship 2011-2013 at 7.)

19.3.3.3

The right to complain to the European Ombudsman Article 24, third paragraph TFEU states that ‘[e]very citizen of the Union may apply to the Ombudsman …’ This provision is further confirmed by Article 43 ECFR and Article 41 ECFR (right to good administration). Although widely known and strongly established in most European Member States, the ombudsman institution (see 2.3.3) was not established within the EC until the adoption of the 1992 Maastricht Treaty (Article 195 TEC, now Article 228 TFEU). Elected by the European Parliament ‘after each election of the European Parliament for the duration of its term of office’ (Article 228(2), sub-paragraph 1 TFEU), the Ombudsman must perform her duties in total independence and may not seek or take instructions from any Government, institution, body, office or agency, and may not engage in any other occupation (Article 228(4) TFEU). The current European Ombudsman is Emily O’Reilly. Under Article 228(1), first sub-paragraph TFEU, the European Ombusdman is [e]mpowered to receive complaints from any citizen of the Union or any natural or legal person residing or having its registered office in a Member State concerning instances of maladministration in the activities of the Union institutions or bodies, with the exception of the Court of Justice acting in its judicial role. Although the main role of the Ombudsman is to ‘examine such complaints and report on them’, Article 228(1), second sub-paragraph also gives her the power to ‘conduct inquiries for which [s]he finds grounds’ on her own initiative. The

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Ombudsman has used such power to initiate inquiries on public access to documents of EU institutions and bodies, and to assess the Commission’s response to complaints relating to breaches of EU law. Unlike petitions to the European Parliament, which apply to matters coming within the Union’s fields of activity and which affect the petitioner directly, complaints to the Ombudsman concern only ‘instances of maladministration in the activities of the Union institutions or bodies’. Not defined in the EU Treaties or in the Statute of the Ombudsman, the notion of ‘maladministration’ covers instances where ‘[an EU] institution or body fails to act in accordance with the Treaties and with the [EU] acts that are binding upon it, or if it fails to observe the rules and principles of law established by the Court of Justice and Court of First Instance’ (First Annual Report of The European Ombudsman 1995, 22 April 1996, at 8). Maladministration includes, amongst other things, administrative irregularities, administrative omissions, abuse of power, negligence, unlawful procedures, unfairness, malfunction or incompetence, discrimination, avoidable delay, and lack or refusal of information. Should the Ombudsman declare a complaint admissible, EU institutions and bodies have an obligation to supply her with any information she has requested from them and give her access to the files concerned (Article 3(2) of the Ombudsman Statute). She may also request information from Member States’ authorities ‘that may help to clarify instances of maladministration by [EU] institutions or bodies unless such information is covered by laws or regulations on secrecy or by provisions preventing its being communicated’ (Article 3(3) of the Statute). The institution or body concerned will be informed of any maladministration established by the Ombudsman, who may make draft recommendations. The institution or body concerned will then send the Ombudsman a detailed opinion within three months (Article 3(6) of the Statute). The Ombudsman must then send a report to the European Parliament and the institution or body concerned in which she may make recommendations. She will inform the complainant of the outcome of her inquiries, of the opinion expressed by the institution or body concerned and of her recommendations (Article 3(7) of the Statute). The increasing number of registered complaints (over 2,000 complaints a year over the period 2010–2014) is evidence of the success of the Ombudsman institution. Yet the Ombudsman was able to secure a positive outcome in only 20% of all inquiries, a great number of which focused on lack of transparency in EU administration (see Annual Report 2014 of 16 February 2015, at 7). 19.3.3.4

The right to use any EU official language in correspondence with EU institutions and bodies A rather peculiar addition under the Amsterdam Treaty, Article 24, fourth paragraph TFEU provides: Every citizen of the Union may write to any of the institutions or bodies referred to in this Article or in Article 9 of the Treaty on European Union in one of the languages mentioned in Article 53(1) of the Treaty on European Union and have an answer in the same language. This right is reiterated in Article 41(4) ECFR: Every person may write to the institutions of the Union in one of the languages of the Treaties and must have an answer in the same language.

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This right is rather vaguely defined and cannot be regarded as benefiting only European citizens, and seems to be more about effective communication with EU institutions and bodies and transparency of EU administration. In this respect, it would have been more judicious to link it directly to the right to access to documents of the Union institutions, bodies, offices and agencies as provided for under Article 15(3) TFEU and under Article 42 ECFR. Political rights right to vote and stand at European elections (Arts 22(2) TFEU and 39 ECFR) right to vote and stand at municipal elections (Arts 22(1) TFEU and 40 ECFR) European citizenship initiative (Arts 11(4) TEU and 24, first para TFEU)

Legal rights right to diplomatic and consular protection (Arts 23, first para TFEU and 46 ECFR) right to petition the EP (Arts 24, second para TFEU and 44 ECFR) right to apply to the European Ombudsman (Arts 24, third para TFEU and 43 ECFR) right to use any EU official language in correspondence with EU institutions and bodies (Arts 24, fourth para TFEU and 41(4) ECFR)

Figure 19.2 Citizens’ rights

19.4 Further reading Barber N, ‘Citizenship, Nationalism and the European Union’ (2002) 27(3) EL Rev 241. Bellamy R, ‘A Duty-Free Europe? What’s Wrong with Kochenov’s Account of EU Citizenship Rights’ (2015) 21(4) European Law Journal 558. Davis R, ‘Citizenship of the Union … Rights for All?’ (2002) 27(2) EL Rev 121. Dougan M, ‘What Are we to Make of the Citizens’ Initiative?’ (2011) 48 CML Rev 1807. Hailbronner K and Thym D, ‘Case C-34/09, Gerardo Ruiz Zembrano v Office National de L’Emploi (ONEm)’ (2011) 48 CML Rev 1253. Hinarejos A, ‘Citizenship of the EU: Clarifying “Genuine Enjoyment of the Substance” of Citizenship Rights’ (2012) 71(2) Cambridge Law Journal 279. Jacobs F, ‘Citizenship of the European Union—A Legal Analysis’ (2007) 13(5) European Law Journal 591. Jacqueson C, ‘Union Citizenship and the Court of Justice: Something New under the Sun? Towards Social Citizenship’ (2002) 27(3) EL Rev 260. Karatzia A, ‘The European Citizens’ Initiative in Practice: Legal Admissibility Concerns’ (2015) 40(4) EL Rev 509. Karatzia A, ‘The European Citizens’ Initiative and the EU Institutional Balance: on Realism and the Possibilities of Affecting EU Lawmaking’ (2017) 54 CML Rev 177. Karatzia A, ‘The European Citizens’ Initiative and Greek Debt Relief: Anagnostakis’ (2019) 56 CML Rev 1069. Kochenov D, ‘A Real European Citizenship: A New Jurisdiction Test: a Novel Chapter in the Development of the Union in Europe’ (2011) 18 Columbia Journal of European Law 55. Kochenov D, ‘The Essence of EU Citizenship Emerging from the Last Ten Years of Academic Debate: Beyond the Cherry Blossoms and the Moon?’ (2013) 62(1) ICLQ 97. Kochenov D, ‘EU Citizenship without Duties’ (2014) 20(4) European Law Journal 482.

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Kochenov D and Plender R, ‘EU Citizenship: from an Incipient Form to an Incipient Substance? The Discovery of the Treaty Text’ (2012) 37(4) EL Rev 369. Konstadinides T, ‘La Fraternité Européenne? The Extent of National Competence to Condition the Acquisition and Loss of Nationality from the Perspective of EU Citizenship’ (2010) 35(3) EL Rev 401. Lenaerts K, ‘EU Citizenship and the European Court of Justice's “Stone-by-Stone” Approach’ (2015) 1 International Comparative Jurisprudence 1. Moraru M, ‘An Analysis of the Consular Protection Directive: Are EU Citizens now Better Protected in the World? (2019) 56 CML Rev 417. Organ J, ‘Decommissioning Direct Democracy? A Critical Analysis of Commission Decision-Making on the Legal Admissibility of European Citizens’ Initiative Proposals’ (2014) 10(3) European Constitutional Law Review 422. Reich N, ‘Citizenship and Family on Trial: A Fairly Optimistic Overview of Recent Court Practice with regard to Free Movement of Persons’ (2003) 40 CML Rev 615. Shuibhne N, ‘The Resilience of the EU Market Citizenship’ (2010) 47 CML Rev 1597. Staiano F, ‘Derivative Residence Rights for Parents of Union Citizen Children under Article 20 TFEU: Chavez-Vilchez’ (2018) 55 CML Rev 225. Van Der Mei A, ‘Union Citizenship and the Legality of Durational Residence Requirements for Entitlement to Student Financial Aid’ (2009) 16 Maastricht J Eur & Comp L 477. White R, ‘Free Movement, Equal Treatment, and Citizenship of the Union’ (2005) 54(4) ICLQ 885. Summary

ry ma sum

As an ‘experimental form of non-state membership’ (Editorial, ‘Three Paradoxes of EU Citizenship’ (2010) 35(2) EL Rev 129 at 130), European citizenship has certainly become a core concept of EU law which has added a political dimension to the original economic nature of the European integration process. Additional to national citizenship, European citizenship has been elevated to the fundamental status of EU nationals upon whom it confers a set of specific legal and political rights. In particular, with European citizenship being recognised by the Court as a source of free movement rights, European citizens are entitled to enter and reside in another Member State purely as citizens of the Union but also to enjoy the same treatment in law as the nationals of the host States irrespective of their nationality. Attached to this status are a number of political rights (right to vote and stand at local and European elections and the European citizens’ initiative) and legal rights (right to diplomatic and consular protection, right to petition the European Parliament and right to complain to the European Ombudsman).

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‘The legal, political and social threads of citizenship are not sufficiently joined up but we may need to reflect on this more creatively than we might like. EU citizenship is an experimental form of non-state membership. The same rules do not necessarily apply.’ (Editorial, ‘Three Paradoxes of EU Citizenship’ (2010) 35(2) EL Rev 129 at 130) Discuss. The Court’s case law on European citizenship has often been criticised for promoting a legal concept which is not supported by clear and adequate political and social foundations. Critically analyse the contribution of the Court to the development of this concept. ‘Many commentators have seen the absence of civic duties relating to the rights of EU citizenship as a central flaw. In a recent article, Dimitry Kochenov disputes this view and defends “an EU citizenship without duties”.’ (Bellamy R, ‘A Duty-Free Europe? What’s Wrong with Kochenov’s Account of EU Citizenship Rights’ (2015) 21(4) European Law Journal 558, at 558) Discuss whether a ‘thicker’ kind of EU citizenship would or should entail a development of civic duties towards the EU.

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The Free Movement of European Citizens

After reading this chapter, you will be able to understand: • the right of EU citizens to enter and reside in another Member State • the concept of EU citizens’ family members and their right of free movement and residence • the right to equal treatment • the limits to the right of free movement.

20.1 Introduction The freedom of movement and residence has profoundly changed since the origins of the European Union. As a result of the predominantly economic dimension of the Treaty of Rome, free movement rights were enjoyed exclusively by nationals of Member States who were economically active, namely workers and self-employed persons. The freedom of movement developed in different ways. First, beyond the economic dimension and as a result of the creation of European citizenship (see 19.2), the free movement of economically active migrants developed into the freedom of movement of European citizens, thus offering more rights to a greater number of beneficiaries. Secondly, the Schengen agreements of 1985 and 1990, acting as instruments of generalisation and intensification of the free movement of persons, including that of third country nationals, have contributed to the creation of an area of freedom, security and justice beyond a purely economic area, later set up in the 1997 Amsterdam Treaty and elevated to a Union objective by the 2007 Lisbon Treaty. Closely linked to the principle of equal treatment, the freedom of movement is, however, subject to certain limitations which are clearly defined in the Treaties and secondary legislation, and strictly interpreted by the Court of Justice.

20.2 Free movement within the area of freedom, security and justice Under Article 3(2) TEU, one of the Union’s major objectives is to … offer its citizens an area of freedom, security and justice without internal frontiers, in which the free movement of persons is ensured in conjunction with appropriate measures with respect to external border controls, asylum, immigration and the prevention and combating of crime. Originally limited to economically active persons, namely workers, self-employed persons and their families (see 15.2 and 15.3), the right of free movement is now enjoyed not only by all EU nationals but also, in ‘the absence of internal border controls for persons’, by third country nationals (Article 67(2) TFEU).

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Further integration, together with growing immigration, has gradually led to the creation of an area without frontiers for persons. Originally created step by step through intergovernmental cooperation, this area of freedom, security and justice was formally established under the 1997 Amsterdam Treaty and completed by the 2007 Lisbon Treaty.

20.2.1 Genesis of the area of freedom, security and justice Amongst all measures adopted by way of intergovernmental cooperation, the Schengen agreements constitute the foundation of this area of freedom, security and justice. Disagreements between the then nine EEC Member States on the abolition of border controls led five of its original Member States (Belgium, the Federal Republic of Germany, France, Luxembourg and the Netherlands) to go ahead with the project of abolishing border controls between them, adopting common rules on visas and establishing police and judicial cooperation. These objectives were achieved through the adoption of the Schengen Agreement of 14 June 1985 and the Schengen Convention of 19 June 1990, thus creating what is now known as the Schengen area. Independent of EEC law and governed by public international law, the Schengen agreements were a form of experimental project in anticipation of the creation of a borderless area within the then European Community. The Schengen area gradually enlarged to include currently 22 out of 28 EU Member States (Ireland and the UK are maintaining their opt-outs – see current Protocol on the Schengen acquis integrated into the framework of the European Union; Bulgaria, Croatia, Cyprus and Romania have a legal obligation to join once ready to do so) and four non-EU States (Iceland, Norway, Switzerland and Liechtenstein). It also includes de facto the three micro-States of Monaco, San Marino and the Vatican City. The Schengen area is first an area of freedom within which EU nationals and third country nationals (the latter are entitled to move within Schengen for three months or for a longer period depending on their visa) may move freely and without being subject to individual border controls. It is also an area of security where individual border controls are transferred from the Member States’ borders to the external borders of the Union, and within which national judicial, police and border control authorities have developed closer cooperation based notably on the Schengen Information System (SIS), a database permanently available to them. The abolition of internal border controls was therefore accompanied by the necessary harmonisation of national rules applicable to non-EU nationals and closer police cooperation based on the principle of mutual trust between Member States. Originally based on some form of coordination between police authorities and government home affairs departments, or bilateral conventions between certain Member States, police cooperation was formalised under the third pillar established under the Maastricht Treaty on cooperation in the fields of justice and home affairs, covering notably asylum policy, rules governing the crossing by persons of the external borders of the Member States, immigration policy and policy regarding nationals of third countries, judicial cooperation in civil and criminal matters, and customs and police cooperation (for pillar structure, see 1.5). The 1997 Amsterdam Treaty incorporated into the EC Treaty those matters covered in the third pillar with the exception of judicial and police cooperation in criminal matters (Title IV on Visas, asylum, immigration and other policies related to free movement of persons, Articles 61 to 69 TEC) ‘in order to establish progressively an

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area of freedom, security and justice’ (Article 61 TEC). Its second Protocol also integrated the Schengen agreements or acquis into the framework of the EU. Under the Amsterdam Treaty, a new impetus was given to the creation of an area of freedom, security and justice with the adoption of the programmes of Tampere (1999– 2004) and The Hague (2004–09).

20.2.2 The area of freedom, security and justice under the Lisbon Treaty Following the abolition of the pillar structure under the Lisbon Treaty, all the provisions on the area of freedom, security and justice (AFSJ) were incorporated into Title V of the Treaty on the Functioning of the European Union (TFEU) (Articles 67 to 89 TFEU). Title V covers policies on border checks, asylum and immigration (Articles 77 to 80), judicial cooperation in civil matters (Article 81), judicial cooperation in criminal matters (Articles 82 to 86) and police cooperation (Articles 87 to 89). The Lisbon Treaty has reinforced some of the previous provisions, notably those relating to Europol (Article 88), Eurojust (Article 85) from which a European Public Prosecutor’s Office can be established (Article 86), the common asylum policy (Article 78) and the common immigration policy (Article 79). It also establishes the power of the European Council to ‘define the strategic guidelines for legislative and operational planning within the area of freedom, security and justice’ (Article 68), a role it fulfilled when it adopted in December 2009 the Stockholm programme ([2010] OJ C115/1). The incorporation of the third pillar provisions into the TFEU also means that qualified majority voting (see 2.3.2.3) applies in principle in the adoption of AFSJ measures. Exceptions remain, however, where unanimity in the Council is required, notably for measures concerning: • national identity cards and passports, residence permits or any similar documents (Article 77(3)); • family law with cross-border implications (Article 81(3)); • the establishment of a European Public Prosecutor’s Office (Article 86(1)); • the conditions under which national criminal courts and law enforcement authorities can operate in the territory of another Member State (Article 89); and • operational cooperation between national police, customs and specialised law enforcement services (Article 87(3)). In the absence of unanimity in the Council, the procedure may be suspended (emergency brake) and a minimum of nine Member States may request that the draft measures be referred to the European Council. Should disagreement persist, those nine Member States may establish enhanced cooperation (see 3.3.4) on the basis of those draft measures in accordance with Article 20(2) TEU and Article 329(1) TFEU (Article 87(3), sub-paragraphs 2 and 3). It is to be noted also that the UK, Ireland and Denmark benefit from ‘opt-outs’ and ‘opt-ins’ in the areas of judicial and police cooperation (see Protocol 21 on the position of the United Kingdom and Ireland in respect of the area of freedom, security and justice, and Protocol 22 on the position of Denmark [2012] OJ C326/1).

20.3 European Union migrants and family members’ right to free movement and residence Article 21(1) TFEU provides the right for every citizen of the Union

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… to move and reside freely within the territory of the Member States … Such freedom is not absolute, however, and is ‘subject to the limitations and conditions laid down in the Treaties and by the measures adopted to give them effect’ (see 20.5). The scope of application and conditions for the exercise of the right of free movement and residence are further specified in Directive 2004/38/EC on the right of citizens of the Union and their family members to move and reside freely within the territory of the Member States amending Regulation (EEC) No 1612/68 and repealing Directives 64/221/EEC, 68/360/EEC, 72/194/EEC, 73/148/EEC, 75/34/EEC, 75/35/ EEC, 90/364/EEC, 90/365/EEC and 93/96/EEC ([2004] OJ L158/77). As the full title of the Directive shows, the 2004 Directive (the Citizenship Directive) consolidated nine former directives. Incorporating also the case law of the Court of Justice interpreting this former body of law, it not only constitutes a full codification of the right of free movement and residence but also extends the scope of this right.

20.3.1 Economically active and inactive EU migrants The regulation of the right to the freedom of movement and residence in other EU Member States has fundamentally evolved. Originally conceived as a corollary of the freedom to exercise an economic activity (see Chapter 15), this right is now regarded as a fundamental right of all European citizens (see Chapter 19). As a result, the beneficiaries of this right include not only economically active but also economically inactive EU migrants, such as persons with sufficient resources, persons who have reached retirement age, and students. This extension of the right of free movement and residence to economically inactive persons was initiated in 1990 with the adoption of three directives: Directive 90/364/EEC on the right of residence ([1990] OJ L180/26), Directive 90/365/EEC on the right of residence for employees and self-employed persons who have ceased their occupational activity ([1990] OJ L180/28) and Directive 90/366/EEC replaced by Directive 93/96/EEC on the right of residence for students ([1993] OJ L317/59). Economically active EU migrants (Article 7(1)(a) of the Citizenship Directive): workers self-employed persons Economically inactive EU migrants (Article 7(1)(b) of the Citizenship Directive): self-sufficient or retired persons with sufficient financial resources and with comprehensive sickness insurance cover Economically inactive EU migrants (Article 7(1)(c) of the Citizenship Directive): persons who are enrolled at a private or public establishment, accredited or financed by the host Member State for the purpose of studying, who have sufficient financial resources and comprehensive sickness insurance cover

Figure 20.1 The direct beneficiaries of the freedom of movement and residence

Those provisions are now incorporated into Article 7(1)(b) of the Citizenship Directive with regard to economically inactive (self-sufficient and retired) persons and Article 7(1)(c) for students enrolled on a course of study or vocational training ‘in a private or public establishment, accredited or financed by the host Member State’.

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However, their right of residence (and that of their family members) is subject to the dual condition that they do not ‘become a burden on the social assistance system of the host Member State during their period of residence and have comprehensive sickness insurance cover in the host Member State’.

20.3.2 Migrants’ family members The right of economically active migrants to be joined by their families was recognised very early on in Community legislation. Recital 5 of the preamble to Regulation 1612/ 68/EEC on freedom of movement for workers within the Community ([1968] OJ L257/ 2) (now recital 6 of the preamble to Regulation 492/2011/EU on freedom of movement for workers within the Union ([2011] OJ L141/1)) provided that … the right of freedom of movement, in order that it may be exercised, by objective standards, in freedom and dignity, requires that … obstacles to the mobility of workers shall be eliminated, in particular as regards the worker’s right to be joined by his family and the conditions for the integration of that family into the host country. This right was clearly established in Article 10 of Regulation 1612/68 and in Article 1 of Directive 73/148/EEC on the abolition of restrictions on movement and residence within the Community for nationals of Member States with regard to establishment and the provision of services ([1973] OJ L172/14). The purpose of those provisions was not only to facilitate mobility of workers and self-employed persons but also to ensure that their right to family life, as protected under Article 8 ECHR, was respected. This right to be joined by their family, irrespective of their nationality (see Case C370/90 R v Immigration Appeal Tribunal and Singh, ex parte Secretary of State for Home Department [1992] ECR I-4265; Case C-291/05 Minister voor Vreemdelingenzaken en Integratie v Eind [2007] ECR I-10719; Case C-127/08 Metock and Others v Minister for Justice, Equality and Law Reform [2008] ECR I-6241 and Case C-456/12 O v Minister voor Immigratie, Integratie en Asiel and Minister voor Immigratie, Integratie en Asiel v B EU:C:2014:135), has been extended to all EU migrants under the Citizenship Directive (see recital 5). In the case where family members are not EU nationals, such right to be joined by their family members remains when EU citizens return to their home country after having exercised their free movement rights in another Member State (Singh, para 25 and Eind, para 45), since the refusal to grant a derived right of residence to family members would have the effect of discouraging EU citizens from leaving their home country and exercising their free movement rights in the first place ‘simply because of the prospect for [those Union citizens] of not being able, on returning to [their] Member State of origin, to continue living together with close relatives, a way of life which may have come into being in the host Member State as a result of marriage or family reunification’ (see Eind, paras 35–36; see also Lida, para 70). Neither Article 21 TFEU nor the Citizenship Directive confer an autonomous right of residence on third-country nationals however (see Case C-40/11 Iida v Stadt Ulm EU:C:2012:691, para 66, and Case C-87/12 Ymeraga and Others v Ministre du Travail, de l’Emploi et de l’Immigration EU:C:2013:291, para 34). Such rights are only rights derived from the exercise of freedom of movement by a Union citizen (see Iida, para 67; Ymeraga, para 35; and Case C-86/12 Alokpa and Others v Ministre du Travail, de l’Emploi et de l’Immigration EU:C:2013:645, para 22). It is also clear from a literal, systematic and teleological interpretation of Directive 2004/38, and notably its Articles

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6, 7(1) and (2) and 16(1) and (2) which refer to ‘another Member State’ or the ‘host Member State’, that it does not establish a derived right of residence for third country nationals who are family members of a Union citizen in the Member State of which that Union citizen is a national (see Case C-434/09 McCarthy v Secretary of State for the Home Department EU:C:2011:277, para 37, and Iida, para 64). Where a third-country national who is a family member of a Union citizen cannot rely on the Citizenship Directive and cannot invoke a derived right of residence in the Member State of which that citizen is a national, then that right might, in some circumstances, be based on Article 21(1) TFEU. This was the situation of Mr O and Mr B in Case C-456/12 O v Minister voor Immigratie, Integratie en Asiel and Minister voor Immigratie, Integratie en Asiel v B EU:C:2014:135. This case concerned the refusal by the Dutch authorities to grant a right of residence to Mr O, a Nigerian national and Mr B, a Moroccan national, where their Dutch wife and partner respectively returned to the Netherlands after short periods of residence in another Member State (in Spain and Belgium respectively) with them. Such refusal may interfere with the EU citizens’ freedom of movement under Article 21 TFEU as the EU citizens may be discouraged from leaving their Member State of origin. However, such interference with free movement rights will arise only where the residence in the host Member State has been genuine, in the sense that it satisfies the requirements of Article 7(1) and (2) of the Citizenship Directive relating to a right of residence for a period of longer than three months. Therefore: Where, during the genuine residence of the Union citizen in the host Member State, pursuant to and in conformity with the conditions set out in Article 7(1) and (2) of Directive 2004/38, family life is created or strengthened in that Member State, the effectiveness of the rights conferred on the Union citizen by Article 21(1) TFEU requires that the citizen’s family life in the host Member State may continue on returning to the Member of State of which he is a national, through the grant of a derived right of residence to the family member who is a third country national. (para 54) The conditions for granting a derived right of residence, on the basis of Article 21 TFEU, ‘should not, in principle, be more strict than those provided for by Directive 2004/38 for the grant of a derived right of residence to a third-country national who is a family member of an EU citizen where that citizen has exercised his right of freedom of movement by becoming established in a Member State other than the Member State of which he is a national’ (para 50). While the Citizenship Directive does not cover the return of the EU citizen to the home State, ‘it should be applied by analogy given that in both cases it is the EU citizen who is the reference point for the grant of a derived right of residence to a third-country national who is a member of his family’ (para 50). While, as the Court observed, it is for the referring court to determine whether the EU citizens concerned have genuinely resided in the host Member States, the Court noted that ‘[i]n that regard, short periods of residence such as weekends or holidays spent in a Member State other than that of which the citizen in question is a national, even when considered together, fall within the scope of Article 6 of Directive 2004/38 and do not satisfy those conditions [set out in Article 7(1) and (2) and Article 16(1) and (2) of the Citizenship Directive]’ (para 59). (By contrast, see Case C-457/12 S v Minister voor Immigratie, Integratie en Asiel and Minister voor Immigratie, Integratie en Asiel v G EU:C:2014:136 where the Union citizens in question had not resided with a family member in another Member State.)

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On the other hand, Article 21 TFEU does not prevent the authorities of a Member State from refusing to grant a derived right of residence to a non-EU family member of a Union citizen who is a national of that State and returns there after having resided in another Member State when the non-EU family member has not entered the territory of the home State of the Union citizen or has not applied for a residence permit as a ‘natural consequence’ (emphasis added) of the return of the Union citizen to the home State provided that, in their overall assessment, the national authorities take account of other relevant factors capable of showing that, despite the time which elapsed between the return of the Union citizen to the home State and the entry of the family member in that same State, the family life created and strengthened in the host Member State has not ended, thus justifying the granting to the family member a derived right of residence (see Case C-230/17 Deha Altiner and Ravn v Udlændingestyrelsen EU:C:2018:497). What, however, of a third-country national who married an EU national after she acquired the nationality of the State of residence while retaining her nationality of origin? Would that third-country national have a derived right of residence in that Member State on the basis of either Directive 2004/38 or Article 21(1) TFEU? This was the issue dealt with by the Court in Case C-165/16 Lounes v Secretary of State for the Home Department EU:C:2017:862. Mr Lounes, an Algerian national, who had entered the UK in 2010 on a six-month visitor visa but overstayed illegally, married in 2014 Ms Ormazabal, a Spanish national, who moved to the UK as a student in 1996 before working there full time since 2004 and becoming a naturalised British citizen in 2009 while retaining her Spanish nationality. Following their marriage, Mr Lounes applied for a residence card as a family member of an EEA (European Economic Area) national. The application was refused on the ground that, under the Immigration (European Economic Area) Regulations 2006 transposing the 2004 Directive, his wife had ceased to be regarded as an ‘EEA national’ (the EEA Regulations 2006 use the term ‘EEA national’ in place of ‘Union citizen’) following her acquisition of British citizenship. After observing again that the 2004 Directive does not confer any autonomous right on family members of EU citizens who are non-EU nationals but only rights derived from the rights which the EU citizens concerned enjoys as a result of having exercised their freedom of movement (para 32 and McCarthy para 38), the Court reiterated that EU citizens who move to or reside in a Member State other than their home country, and their family members who accompany or join them, are beneficiaries of the rights conferred by the Directive (para 34 and O and B, para 38), but it also pointed out that the Directive is not intended to govern the residence of EU citizens in the Member State of which they are a national as, under a principle of international law, they have an unconditional right of residence in that State (para 37; McCarthy, paras 29, 34 and 42 and O and B, paras 42 and 43). The logical conclusion to be drawn was that the 2004 Directive no longer applied to Mrs Ormazabal’s situation since, as Advocate General Bot pointed out in his Opinion, her acquisition of British citizenship led to a change in the legal rules applicable to her under both national law and the Directive (EU:C:2017:407, paras 48 and 63). Indeed, as she was no longer residing in a ‘Member State other than that of which [she is now] a national’, she is no longer a ‘beneficiary’ within the meaning of Article 3(1) of the 2004 Directive (paras 41–43). Consequently, her spouse ‘cannot benefit from a derived right of residence in the UK on the basis of the directive’ (para 44). Nonetheless, the Court established in previous cases that non-EU family members of a Union citizen who are not eligible under the 2004 Directive for a derived right of

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residence in the Member State of which that citizen is a national could, in certain circumstances, be granted such a right on the basis of Article 21(1) TFEU (O and B, paras 44 to 50 and Chavez-Vilchez, para 54). As under the 2004 Directive, such right is a right derived from the rights enjoyed by the Union citizen concerned as Article 21 TFEU does not confer an autonomous right of residence on a third-country national (para 47, and Iida, paras 66–67, and O and B, para 36). Rejecting the UK Government’s argument that Mrs Ormazabal’s situation was a purely domestic situation equivalent to that of British citizens who had never exercised their free movement rights, the Court considered that she could rely on the rights provided for by Article 21(1) TFEU against the UK since she had exercised as a Union citizen her freedom to move and reside in the UK before acquiring British citizenship (paras 49–51). Those rights not only include the ‘right to lead a normal family life, together with their family members’ (para 52) but also promote ‘the gradual integration of the Union citizen concerned in the society of the host Member State’ (para 56). Treating Mrs Ormazabal in the same way as a British citizen who has never left the UK would undermine the effectiveness of Article 21 TFEU since it would be contrary to the underlying logic of gradual integration that informs Article 21(1) TFEU to hold that such citizens, who have acquired rights under that provision as a result of having exercised their freedom of movement, must forego those rights — in particular the right to family life in the host Member State — because they have sought, by becoming naturalised in that Member State, to become more deeply integrated in the society of that State. (para 58) Consequently, the Court ruled that a third-country national in Mr Lounes’ situation is eligible for a derived right of residence under Article 21(1) TFEU, on conditions which must not be stricter than those provided for by Directive 2004/38 for the grant of such a right to a third-country national who is a family member of a Union citizen who has exercised his right of freedom of movement by settling in a Member State other than the Member State of which he is a national (para 62). The same principles apply to a situation where an EU citizen returns to his home State, in which case that Member State must facilitate the entry and residence of the non-EU partner with whom that citizen has a durable relationship as covered by Article 3(2)(b) of the Citizenship Directive (see below) (see Case C-89/17 Secretary of State for the Home Department v Rozanne Banger EU:C:2018:570, para 35). The refusal of a residence authorisation to the non-EU partner must be founded on an ‘extensive examination of the applicant’s personal circumstances and be justified by reasons’ (para 43). For the purposes of the Citizenship Directive, the definition of ‘family member’ was enlarged under Article 2(2) so as to include: (a) the spouse. This term refers exclusively to a marital relationship, ie to a person joined to another person by the bonds of marriage (see Case 59/85 Netherlands v Reed [1986] ECR 1283, para 15 and Case C-127/08 Metock and Others EU:C:2008:449, paras 98–99) and does not include unmarried partners unless, as in Reed, an EU migrant has the right to live with their unmarried partner if that right is granted to the nationals of the host State. Such marital relationship must of course be a genuine one and not one of convenience (see Case C-109/01 Secretary of State for the Home Department v Akrich [2003] ECR I-9607). Partners

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may live separately and will be regarded as married until their marital relationship is officially dissolved (see Case 267/83 Diatta v Land Berlin [1985] ECR 567, para 20). As the term ‘spouse’ within the meaning of the 2004 Directive is genderneutral, it covers the same-sex spouse of a Union citizen and includes a thirdcountry national of the same sex as the Union citizen whose marriage to that citizen was concluded in a Member State in accordance with the law of that state (Case C-673/16 Coman and Others v Inspectoratul General pentru Imigrări and Ministerul Afacerilor Interne EU:C:2018:385, para 35). Since the concept of ‘spouse’ is not qualified as is the term ‘registered partner’ under Article 2(2)(b) of the Directive (see below), ‘a Member State cannot rely on its national law as justification for refusing to recognise in its territory, for the sole purpose of granting a derived right of residence to a third-country national, a marriage concluded by that national with a Union citizen of the same sex in another Member State in accordance with the law of that state’ (para 36). As the 2004 Directive makes no reference to Member State law in order to determine the nature of ‘spouse’, that concept was interpreted autonomously and uniformly throughout the EU (see Opinion of AG Wathelet EU:C:2018:2, paras 33–42); (b) the partner – of the same or different gender – with whom the EU migrant has entered into a registered partnership, under the law of a Member State, ‘if the legislation of the host Member State treats registered partnerships as equivalent to marriage and in accordance with the relevant legislation of the host Member State’. Where the registered partnership is not treated in the host Member State as equivalent to marriage, the registered partner would enjoy the same right as other family members under Article 3(2) (see below); (c) the direct descendants who are under the age of 21 or are dependants and those of the spouse or registered partner (ie children and grandchildren, etc). The concept of a ‘direct descendant’ generally refers to the existence of a direct parent-child relationship connecting an adult with a child in the absence of which a child cannot be described as a ‘direct descendant’. Such relationship would exist in the case of biological or adopted children but not in that of a child who has been placed in the permanent legal guardianship of a Union citizen under the Algerian kafala system (an institution in the family law of some countries that follow the Koranic tradition). Such child would, however, fall under the definition of one of the ‘other family members’ under Article 3(2)(a) of 2004 Directive (see below) (see Case C-129/18 SM v Entry Clearance Officer, UK Visa Section EU:C:2019:248, paras 56–57); and (d) the direct dependent ascendants and those of the spouse or registered partner (ie parents and grandparents, etc). With regard to those family members joining or accompanying an EU migrant, the Member States have little scope for discretion in recognition of their rights of free movement and residence under the Citizenship Directive. Furthermore, as recital 6 of the preamble to the Citizenship Directive states: In order to maintain the unity of the family in a broader sense and without prejudice to the prohibition of discrimination on grounds of nationality, the situation of those persons who are not included in the definition of family members under this Directive, and who therefore do not enjoy an automatic right of entry and residence in the host Member State, should be examined by the host

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Member State on the basis of its own national legislation, in order to decide whether entry and residence could be granted to such persons, taking into consideration their relationship with the Union citizen or any other circumstances, such as their financial or physical dependence on the Union citizen. On this basis, Article 3(2)(a) covers any other family members, whether EU or non-EU nationals, such as siblings, cousins, aunts and uncles and other relatives if they are dependants or are members of the EU migrant’s household (see Case C-1/05 Jia v Migrationsverket [2007] ECR I-1 and SM) or ‘where serious health grounds strictly require personal care’ by the EU migrant. Equally, Article 3(2)(b) confers rights of free movement and residence to the partner with whom the EU migrant has a durable, duly attested relationship, which covers same and different gender relationships and, notably, de facto ones such as cohabitation (see Banger). The close family members (Article 2(2) of the Citizenship Directive): the spouse the registered partner the direct descendants who are under the age of 21 or are dependants and those of the spouse or partner the dependent direct relatives in the ascending line and those of the spouse or partner Any other family members, irrespective of nationality (Article 3(2)(a) of the Citizenship Directive): dependants or members of the household of the EU migrant having the primary right of residence, or requiring personal care from the EU migrant in case of serious health conditions The partner with whom the EU migrant has a durable relationship duly attested (Article 3(2)(b) of the Citizenship Directive)

Figure 20.2 The EU migrant’s family members

20.3.3 Right to move and reside in another Member State 20.3.3.1

The right to move freely The right of free movement consists of the rights to exit and to enter any Member State. The right of exit Based on Article 2(1) of Protocol 4 to the ECHR (‘Everyone shall be free to leave any country, including his own’) and inherent in the status of European citizen, the right ‘to leave the territory of a Member State to travel to another Member State’ is guaranteed for all Union citizens and their family members under Article 4(1) of the Citizenship Directive and may only be restricted on the ground that ‘the personal conduct of that [Union citizen] constitutes a genuine, present and sufficiently serious threat to one of the fundamental interests of society’ (see Case C-33/07 Ministerul Administratiei si Internelor – Directia Generala de Pasapoarte Bucuresti v Jipa [2008] ECR I-5157, para 30; see below 20.5). For that purpose, Article 4(3) of the Directive requires that Member States ‘issue to their own nationals, or renew, an identity card or passport stating their nationality’, and Article 4(2) prohibits the requirement for exit visas or equivalent formalities.

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The right of entry The right of nationals of a Member State to enter the territory of another Member State, now established under Article 5 of the Citizenship Directive, has been regarded by the Court of Justice as ‘… a right conferred directly by the Treaty, or, as the case may be, by the provisions adopted for its implementation’, with the effect that it ‘is acquired independently of the issue of a residence permit by the competent authority of a Member State’ (see Case 48/75 Royer [1976] ECR 497, paras 31–32). Like former Directive 68/360/EEC on the abolition of restrictions on movement and residence within the Community for workers of Member States and their families ([1968] OJ English special edition: Series I Volume 1968(II) 485) and Directive 73/148/EEC, Article 5(1) of the Citizenship Directive provides that Union citizens have the right to enter the territory of a Member State on the production of a valid identity card or passport. National authorities may require a person, under threat of criminal penalties, to hold identity papers with the view to establishing nationality upon entry into the territory of a Member State provided that those penalties are not disproportionate ‘thus creating an obstacle to the free movement of workers’ (Case C-378/97 Criminal proceedings against Wijsenbeek [1999] ECR I-6207, para 45; Case C-265/88 Criminal proceedings against Messner [1989] ECR 4209, para 14; Case C-24/97 Commission v Germany [1998] ECR I-2133, paras 13 and 14). The Citizenship Directive also prohibits the imposition of entry visas or equivalent formalities (Article 5(1), second sentence; see also Case 157/79 R v Pieck [1980] ECR 2171, para 10). Family members who are not EU nationals are required to hold a valid passport (Article 5(1)) and to have an entry visa in accordance with Regulation 539/2001/EC ([2001] OJ L81/1) listing the third countries whose nationals must be in possession of visas when crossing the external borders and those whose nationals are exempt from that requirement (Article 5(2)). However, they must be granted by national authorities every facility to obtain the necessary visas which must be ‘issued free of charge as soon as possible and on the basis of an accelerated procedure’. Furthermore, the visa requirement is waived if the family member has a valid residence card of a family member of a Union citizen (see Case C-754/18 Ryanair Designated Activity Company v Országos Rendőr-főkapitányság EU:C:2020:478). In line with the case law of the Court of Justice, Article 5(5) allows a Member State to require that migrants ‘report their presence within its territory within a reasonable and non-discriminatory period of time’ (see Case 118-75 Watson and Belmann [1976] ECR 1185, para 18; Messner: the requirement, subject to imprisonment or a fine, to make a declaration of residence within three days of entering a State’s territory is not reasonable, para 15), failing which they could be made ‘liable to proportionate and non-discriminatory sanctions’. Such sanctions cannot amount to deportation however.

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Right of exit (Article 4 of the Citizenship Directive)

ULJKWWROHDYHD0HPEHU6WDWHWRWUDYHO WRDQRWKHURQH QRH[LWYLVD

Right of entry (Article 5 of the Citizenship Directive)

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Figure 20.3 The right to move

20.3.3.2

The right of residence Under Article 22 of the Citizenship Directive, Union citizens and their family have a right of residence over the whole territory of the host Member State, and territorial restrictions may be imposed only under the same conditions as those applicable to that State’s own nationals (see Case 36/75 Rutili v Ministre de l’intérieur [1975] ECR 1219, para 53) and provided they comply with the principle of proportionality (Case C-100/ 01 Ministre de l’Intérieur v Olazabal [2002] ECR I-10981, para 45). The Directive lays down three different regimes of residence under which administrative formalities vary. The right of residence for up to three months Under Article 6(1) of the Directive, Union citizens have a general right of residence in another Member State for a period of up to three months. The only requirement is to hold a valid identity card or passport. Non-EU family members in possession of a valid passport accompanying or joining an EU migrant enjoy the same right (Article 6(2)). The only restriction to this right is that the Union citizen and their family members ‘do not become an unreasonable burden on the social assistance system of the host Member State’ (Article 14(1)). The right of residence for more than three months Article 7 provides a right to mid-term residence for periods of between three months and five years but creates different conditions for different categories of EU migrants and their families. Furthermore, as a result of governments’ concerns over the financing and costs of social assistance systems, and with the view to preventing the free movement of benefit seekers, this right of residence is subject to limitations. The three categories of beneficiaries are: (a) workers and the self-employed who have the right to reside without any conditions (see 15.2.2); (b) the economically inactive (self-sufficient and retired persons) who have sufficient resources for themselves and their family members and have comprehensive sickness insurance cover in the host Member State; and (c) students who are enrolled at an establishment accredited or financed by the host Member State for the main purpose of following a course of study or vocational training and who satisfy the same conditions as the economically inactive for themselves and their family members (under Article 7(4), their spouse, registered partner and their dependent descendants having an automatic right of residence, while other members only have the right to have their entry facilitated).

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For those categories of mid-term residents, administrative formalities apply under Article 8 of the Directive, such as the possible requirement to register with the relevant authorities of the host Member State to ensure that the EU migrant complies with the conditions of the right of residence. A registration certificate (replacing the residence permit) must be automatically delivered on the production of a valid identity card or passport, confirmation or certificate of employment for workers, proof of selfemployment, proof of enrolment at an education establishment for students and proof of comprehensive sickness insurance cover and of sufficient resources for students and the economically inactive. With regard to the condition of having ‘sufficient resources’, Article 8(4) prohibits Member States from imposing a fixed amount of resources, which in any respect may ‘not be higher than the threshold below which nationals of the host Member State become eligible for social assistance, or higher than the minimum social security pension paid by the host Member State’. The Court has also held that the requirement imposed by Article 7(1)(b) of the 2004 Directive is satisfied when those resources are at the disposal of the Union citizen and that there is no requirement as to the origin of those resources (see Case C-200/02 Zhu and Chen EU:C:2004:639, para 30 and Alokpa, para 27). This requirement is also satisfied even if the resources are derived from income obtained from the unlawful employment (see Case C-93/18 Bajratari v Secretary of State for the Home Department EU:C:2019:809: a Union citizen minor whose resources came from income obtained from the unlawful employment of his father, a third-country national, without a residence card and work permit). The legal regime of family members of Union citizens differs on the basis of their being EU citizens themselves or not. Article 8(5) provides that the former will be issued with a registration certificate upon presentation of: • a valid identity card or passport; • the registration certificate or other proof of residence in the host Member State of the EU migrant; • a document proving the existence of a family relationship, a registered partnership or a durable relationship; and • any documentary evidence of being dependent on the EU migrant, or proof of the existence of serious health grounds requiring the personal care of the family member by the EU migrant. Under Article 9 of the Directive, family members who are not EU citizens must apply for a ‘residence card of a family member of a Union citizen’ for a period of residence of more than three months. This residence card must be issued within six months of application (Article 10(1)) (see Case C-246/17 Diallo v État belge EU:C:2018:499, para 43) and be valid for five years from the date of issue or for the envisaged period of residence of the EU migrant if it is under five years (Article 11(1)). In the event of death or departure of the EU migrant (Article 12(1)), or the termination of family ties (divorce, annulment of marriage or termination of registered partnership) (Article 13(1)), EU family members’ right to reside is not affected if they are themselves workers or self-employed, students or inactive persons with comprehensive sickness insurance cover and sufficient resources, or if they are family members of a Union citizen who is dependent on them (eg, children in education). Third country family members do not retain their right of residence in the case of the EU migrant’s departure but retain it following their death provided that they have

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been residing in the host Member State as the migrant’s family members for at least one year before their death (Article 12(2)). In any case, that right is not affected if the family members are the EU migrant’s children, irrespective of their nationality, who are enrolled at an educational establishment and until the completion of their studies, or are the remaining parent who has actual custody of those children (Article 12(3)). In case of divorce or termination of registered partnerships, a third country family member can acquire an autonomous right to reside: • if the marriage or registered partnership has lasted at least three years, including one year in the host Member State (Article 13(2)(a)); however, this provision cannot be relied upon where the commencement of the divorce proceedings is preceded by the departure from that Member State of the spouse who is a Union citizen (see Case C-218/14 Singh and Others v Minister for Justice and Equality EU:C:2015:476, para 70); or • if, by agreement between the spouses or the partners or by court order, the family member has custody of the EU citizen’s children (Article 13(2)(b)); or • if this family member has the right of access to the EU citizen’s minor child, as long as the court ruling states that such access must be in the host Member State; the right to reside is then retained for as long as it is required (Article 13(2)(d)); or • the marriage or the registered partnership was plagued by ‘particularly difficult circumstances’ and, in particular, the family member was a victim of domestic violence (Article 13(2)(c)). Where third-country nationals no longer have a right of residence under the Citizenship Directive because they do not fall within any of the situations referred to in its Article 12(2) and Article 13(2), an expulsion decision may only be taken against them in compliance with the requirements laid down in Article 15(1) of the Directive which provides that ‘the procedures provided for by Articles 30 and 31 shall apply by analogy to all decisions restricting free movement of Union citizens and their family members on grounds other than public policy, public security or public health’ (see Case C-94/18 Chenchooliah v Minister for Justice and Equality EU:C:2019:693) (for procedural requirements and safeguards, see 20.5.3.2). The right of permanent residence This new right is established in Article 16(1) of the Directive, which reads: 1. Union citizens who have resided legally for a continuous period of five years in the host Member State shall have the right of permanent residence there. Under paragraph 2, third country family members who have legally resided with the Union citizen in the host Member State for a continuous period of five years can enjoy the same right. The conditions applicable to the rights of residence under Articles 6 and 7 do not apply to permanent residence. Furthermore, under Article 16(3), continuity of residence will not be regarded as interrupted by temporary absences of no more than six months a year, or by longer absences for compulsory military service, or by absences for important reasons such as pregnancy and childbirth, serious illness, study or vocational training, or a posting in another Member State or a third country, and not exceeding 12 consecutive months. Periods in prison cannot be taken into account, however, for the purpose of acquiring permanent residence and, similarly, periods of imprisonment interrupt in principle the continuity of residence (see Case C-378/12 Onuekwere v Secretary of State for the Home Department EU:C:2014:13, para 32).

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Permanent residence will be lost, however, after an absence from the host Member State of more than two years in a row. By derogation from Article 16, Article 17 provides that the right of permanent residence may be acquired before the completion of the five-year period by workers and self-employed persons who: • have reached the age of entitlement to old age pension or early retirement (Article 17(1)(a)); or • have stopped working as a result of permanent incapacity to work (Article 17(1)(b)); or • are frontier workers (Article 17(1)(c)). Family members, whether EU nationals or not, residing with an EU migrant are entitled to the same permanent right of residence when acquired by that migrant (Article 17(3)). Should the EU migrant die before acquiring the permanent right of residence, the family members who were residing with them are entitled to this right if, at the time of death, the EU migrant resided in the host Member State for a continuous period of two years, or the death was caused by an accident at work or an occupational disease, or even if the surviving spouse lost the nationality of that Member State following marriage to the EU migrant (Article 17(4)). The provisions of Article 17 reflect the link that exists between free movement of persons and European citizenship and the equality of treatment between nationals of the host Member State and nationals of other Member States. Right of short-term residence (Article 6 of the Citizenship Directive) Up to three months No conditions or formalities

Right of medium-term residence (Article 7 of the Citizenship Directive) From three months to five years Economically active migrants and economically inactive migrants with sufficient resources Varying administrative formalities for EU citizens (Article 8 of the Directive) and for non-EU family members (Article 9 of the Directive)

Right of permanent residence (Article 16 of the Citizenship Directive) Over five continuous years of residence All EU migrants and their EU or non-EU family members

Figure 20.4 The right of residence

20.4 Equal treatment rights As a result of the principle of non-discrimination as laid down in Article 18 TFEU, European citizens and their family members have the right to enjoy living conditions similar to those enjoyed by the nationals of the host Member State. Originally applied only to economically active migrants (see 15.4), the principle of equal treatment was extended by the Court of Justice to all European citizens whether economically active or not. In Case C-85/96 Martínez Sala v Freistaat Bayern [1998] ECR I-2691, the Court observed that … a national of a Member State lawfully residing in the territory of another Member State … comes within the scope ratione personae of the provisions of the Treaty on European citizenship. (para 61)

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As such, that national has the right … not to suffer discrimination on grounds of nationality within the scope of application ratione materiae of the Treaty. (para 62) This line of jurisprudence was later confirmed in Case C-184/99 Grzelczyk v Centre public d’aide sociale d’Ottignies-Louvain-la-Neuve [2001] ECR I-6193.

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ca ple The Grzelczyk case concerned the right of residence for students and to national minimum xam e subsistence allowance. Grzelczyk was a French national who took up residence in Belgium to study physical education at the University of Louvain-la-Neuve. During the first three years of his studies, he managed to cover his own costs of maintenance, accommodation and studies by taking on various minor jobs and by obtaining credit facilities. However, in his final year, he decided to apply for the minimex, the Belgian minimum subsistance allowance and a non-contributory social benefit. Originally granted to Grzelczyk, the minimex was withdrawn from him a few months later on the ground that Grzelczyk did not satisfy the nationality requirement and that he was an EEC national enrolled as a student. Following the challenge of that decision by Grzelczyk before a Belgian labour court and on a preliminary reference by that court, the ECJ recalled that a social benefit providing a general guarantee of a minimum subsistence allowance, such as the Belgian minimex, constituted a social advantage granted to workers under Article 7(2) of Regulation 1612/68/EEC (now Regulation 492/2011/EU). Yet, Belgian students who found themselves in the same financial circumstances as Grzelczyk would satisfy the conditions for obtaining the minimex under Belgian law despite not being workers. It was therefore clear that Grzelczyk’s nationality was the only bar to the minimex being granted to him. In line with Martínez Sala, the Court held that [t]he fact that a Union citizen pursues university studies in a Member State other than the State of which he is a national cannot, of itself, deprive him of the possibility of relying on the prohibition of all discrimination on grounds of nationality laid down in Article [18] of the Treaty. (para 36) After observing that, while former Directive 93/96/EC on the right of residence of students did not establish any right to payment of maintenance grants by the host Member State for students, it did not preclude those students to whom it applied from receiving social security benefits. The Court therefore concluded that the entitlement to a non-contributory social benefit, such as the minimex, [could not be] made conditional, in the case of nationals of Member States other than the host State where they are legally resident, on their falling within the scope of Regulation No [492/2011/EU] when no such condition applies to nationals of the host Member State. (para 46) The principle of non-discrimination on the ground of nationality may even apply to a situation where an extradition request for the purpose of enforcing a custodial sentence has been made by a third country for EU citizens who have exercised their right to free movement. If the national law of the requested Member State prohibits the extradition of its own nationals out of the European Union for the purpose of enforcing a sentence and makes provision for the possibility that such a sentence pronounced abroad may be served on its territory, that State must ensure that the EU citizen concerned who resides permanently in its territory receives the same treatment as that accorded to its own nationals in relation to extradition (Case C-247/17 Raugevicius EU:C:2018:898). More recently, by express reference to Grzelczyk (Union citizenship as fundamental status) and Raugevicius (the situation of an EU citizen who has made use of his right to move freely comes within the scope of Article 18 TFEU), the Court even ruled that, unless justified by objective considerations which are proportionate to legitimate

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objectives, the exclusion, in part, of nationals of other Member States from the German senior amateur athletics championships was contrary to Article 18 TFEU, thus establishing the practice of amateur sports and the possibility to participate in amateur championships as a right attaching to the status of Union citizen (see Case C-22/18 TopFit e.V. and Biffi v Deutscher Leichtathletikverband e.V. EU:C:2019:497). The principle of equal treatment is also clearly enshrined in Article 24(1) of the Citizenship Directive: Subject to such specific provisions as are expressly provided for in the Treaty and secondary law, all Union citizens residing on the basis of this Directive in the territory of the host Member State shall enjoy equal treatment with the nationals of that Member State within the scope of the Treaty. The benefit of this right shall be extended to family members who are not nationals of a Member State and who have the right of residence or permanent residence. The development of the principle of equal treatment was originally mainly driven by the recognition of social rights. These were first granted to workers under former Regulation 1612/68/EEC, now replaced by the codification Regulation 492/2011/EU ([2001] OJ L141/1), and notably its Article 7(2) which states that workers must be granted the same tax advantages (see Case C-155/09 Commission v Greece [2011] ECR I-65: exemption from transfer tax on the first purchase of immoveable property granted solely to persons residing in Greece and to persons of Greek origin not residing in Greece at the date of purchase) and social advantages as national workers. The concept of ‘social advantages’ was first defined by the ECJ in Case 207/78 Criminal proceedings against Even and Office national des pensions pour travailleurs salariés (ONPTS) [1979] ECR 2019 as advantages …which, whether or not linked to a contract of employment, are generally granted to national workers primarily because of their objective status as workers or by virtue of the mere fact of their residence on the national territory and the extension of which to workers who are nationals of other Member States therefore seems suitable to facilitate their mobility within the [Union]. (para 22, emphasis added) (See also Reed, para 26; Martínez Sala, para 25; Case C-258/04 Office national de l'emploi v Ioannidis [2005] ECR I-8275, para 35 and Case C-447/18 UB v Generálny riaditeľ Sociálnej poisťovne Bratislava e.a. EU:C:2019:1098, para 47.) Different from social security benefits (these are covered by Regulation 883/2004/EC on the coordination of social security systems [2004] OJ L166/1) – although the two concepts can overlap at times (see Case C-802/18 Caisse pour l'avenir des enfants v FV and GW EU:C:2020:269) – social advantages cover a wide range of benefits, as the case law of the Court of Justice shows. These notably include fare reduction cards issued by a national railway authority to large families (Case 32/75 Cristini v Société nationale des chemins de fer français [1975] ECR 1085), a disability allowance for a worker’s adult child (Case 63/76 Inzirillo v Caisse d’allocations familiales de l’arrondissement de Lyon [1976] ECR 2057), interest-free loans granted on childbirth to families with low income (Case 65/81 Reina and Reina v Landeskreditbank Baden-Württemberg [1982] ECR 33), a social advantage guaranteeing a minimum means of subsistence (Case 249/83 Hoeckx v Openbaar Centrum voor Maatschappelijk Welzijn, Kalmthout [1985] ECR 973; Case C-456/02 Trojani v Centre public d’aide sociale de Bruxelles (CPAS) [2004] ECR I-7573: a person in possession of a residence permit may rely on Article 18 TFEU in order to be granted a social assistance benefit such as the minimex; Case C-224/98 D’Hoop v Office national de l'emploi [2002] ECR I-6191: unlawful refusal by a Member State to grant a

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tideover allowance to one of its nationals, a student seeking her first employment, on the sole ground that that student completed her secondary education in another Member State; Ioannidis; and Grzelczyk), the use of one’s own language in proceedings before the courts of the Member State of residence (Case 137/84 Criminal proceedings against Mutsch [1985] ECR 2681), a special old-age allowance guaranteeing a minimum income to elderly persons (Case 157/84 Frascogna v Caisse des dépôts et consignations [1985] ECR 1739), the grant of a payment to cover funeral expenses incurred by a migrant worker (Case C-237/94 O’Flynn v Adjudication Officer [1996] ECR I-2617), a child-raising allowance (Martínez Sala), assistance granted for maintenance and education in order to pursue university studies evidenced by a professional qualification (Cases 39/86 Lair v Universität Hannover [1988] ECR 3161; Case C-20/12 Giersch and Others EU:C:2013:411; Case C-238/15 Bragança Linares Verruga and Others EU:C:2016:949 and Case C-410/18 Aubriet v Ministre de l'Enseignement supérieur et de la Recherche EU:C:2019:582), a family allowance in respect of the child of the spouse of a frontier worker where there is no parent-child relationship with that worker (Caisse pour l'avenir des enfants v FV and GW), additional benefit introduced for certain high-level sportspersons who have represented a Member State or its legal predecessors in international sporting competitions (UB v Generálny riaditeľ Sociálnej poisťovne Bratislava e.a.) and the bearing of school transport costs (Case C-830/18 Landkreis Südliche Weinstraße v PF and Others EU:C:2020:275). Article 10 of Regulation 492/2011/EU (formerly Article 12 of Regulation 1612/68/ EEC) which provides that [t]he children of a national of a Member State who is or has been employed in the territory of another Member State shall be admitted to that State’s general educational, apprenticeship and vocational training courses under the same conditions as the nationals of that State, if such children are residing in its territory[,] has also been widely interpreted by the Court of Justice so as to include the right to financial aid to be accorded to children of EU migrant workers under the same conditions as the nationals of the host State (see Case 9/74 Casagrande v Landeshauptstadt München [1974] ECR 773, para 14; Case 68/74 Alaimo v Préfet du Rhône [1975] ECR 109, para 12). In its interpretation of this provision, the Court of Justice went even further so as to state that the right to education of children necessarily implies that the children’s parents and primary carers have a right of residence for as long as the children remain their dependants, and this despite the fact that the parents or carers do not meet the requirement of Article 7(1)(b) of the Citizenship Directive that they have sufficient resources for themselves and their family members not to become a burden on the social assistance system of the host Member State. In this situation, the Court made it clear that such requirement must be waived (see Case C-480/08 Teixeira v London Borough of Lambeth and Secretary of State for the Home Department [2010] ECR I-1107, para 70; Case C- 310/08 London Borough of Harrow v Ibrahim and Secretary of State for the Home Department [2010] ECR I-1065, para 59; and Case C-115/15 Secretary of State for the Home Department v NA EU:C:2016:487, paras 52–68).

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Cases such as Martínez Sala, Trojani, D’Hoop, Grzelczyk, Teixeira and Ibrahim show that the principle of equal treatment has led to a recognition of social rights of economically inactive migrants exercising their right of residence in another Member State. Nonetheless, two main derogations are provided for under Article 24(2) of the Citizenship Directive: … 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 in Article 14(4)(b), nor shall it be obliged, prior to acquisition of the right of permanent residence, to grant maintenance aid for studies, including vocational training, consisting in student grants or student loans to persons other than workers, self-employed persons, persons who retain such status and members of their families. First, host Member States have no obligation to provide social assistance to any migrant within the first three months of their residence. This is particularly well illustrated in Case C-138/02 Collins v Secretary of State for Work and Pensions [2004] ECR I-2703, para 73 (national legislation making the entitlement to a jobseeker’s allowance conditional on a residence requirement which is justified on the basis of objective considerations irrespective of nationality and proportionate to the legitimate aim of the national provisions is not contrary to EU law). As the Court put it in Joined Cases C-22/08 and C-23/08 Vatsouras and Koupatantze v Arbeitsgemeinschaft (ARGE) Nürnberg 900 [2009] ECR I-4585, although it is no longer possible to exclude from the scope of Article 48 TFEU a financial benefit intended to facilitate access to employment in the labour market of a Member State, it is nonetheless legitimate for that Member State to grant such a benefit only if a real link between the job-seeker and the labour market (or geographic employment market) of that State can be established, notably by showing that the job-seeker has, for a reasonable period of time, genuinely sought work in the host Member State (see also D’Hoop, para 38; Collins, para 70 and Ioannidis, para 30). Such link to the labour market is obviously non-existent in the case of economically inactive EU citizens who move to another Member State with the sole purpose of obtaining social assistance. In Case C-333/13 Dano and Dano v Jobcenter Leipzig EU:C:2014:2358, the Court of Justice confirmed that such EU migrants may be excluded from certain social benefits.

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ca ple The Dano case concerned two Romanian nationals, a mother and her son, who had xam e entered Germany in November 2010 to live with Ms Dano’s sister who provided for them materially. They were issued by the German authorities with residence certificates in July 2011. Ms Dano received child benefit and an advance on maintenance payments for her son Florin. Ms Dano received little education in Romania and had not been trained in a profession. Although she had some understanding of German, she had limited ability to read and write in that language. Despite her ability to work, she had never worked in Romania or Germany, and there was no indication that she was seeking work in Germany. Nevertheless, she requested special non-contributory cash benefits by way of basic provision for jobseekers under the German Social Code, which are intended in particular to cover subsistence costs. Her request was rejected on two occasions in September 2011 and January 2012 by the Jobcentre Leipzig.

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On a preliminary reference from the Leipzig social court, the Court of Justice pointed out that the Citizenship Directive distinguishes between persons who are working and those who are not. Under Article 7(1)(a) of the Directive, the first group of migrants have the right of residence without having to fulfil any other condition, while the second group of economically inactive persons are required by Article 7(1)(b) of the Directive to meet the condition that they have sufficient resources of their own. As a result, the Court added: ... Article 7(1)(b) of Directive 2004/38 seeks to prevent economically inactive Union citizens from using the host Member State’s welfare system to fund their means of subsistence. (para 76) This means therefore that Member States have the ... possibility of refusing to grant social benefits to economically inactive Union citizens who exercise their right to freedom of movement solely in order to obtain another Member State’s social assistance although they do not have sufficient resources to claim a right of residence. (para 78) The Court concluded that the Citizenship Directive and notably Article 24(1) did not preclude domestic law excluding nationals from other Member States, who do not have a right of residence under the Directive in the host State, from being entitled to certain non-contributory cash benefits, as those claimed by Ms Dano, even if they are granted to the nationals of the host State who are in the same situation (para 84). As the Court observed, Ms Dano and her son did not have sufficient resources as per Article 7(1)(b) of the Directive and therefore did not have a right of residence in Germany. They could therefore not rely on the principle of equal treatment laid down in Article 24(1) of the Directive (para 81).

Later, the Court of Justice extended the lawfulness of the exclusion from certain noncontributory social security benefits in the case of Member State nationals who go to another Member State with no intention of finding employment there, as in Dano, to Union citizens who have gone to a host Member State to search for employment after having already worked for a period in that State, even though those benefits are granted to nationals of the host Member State who are in the same situation (Case C-67/14 Jobcenter Berlin Neukölln v Nazifa Alimanovic and Others EU:C:2015:597: following their return from Sweden to Germany, Ms Alimanovic and her eldest daughter worked in several temporary jobs lasting less than a year, after which time they had not been engaged in any occupational activity. The Alimanovic family was subsequently paid for a period of six months subsistence allowances for long-term unemployment and social allowances for the two other children deemed unfit to work. The Jobcenter Berlin Neukölln finally ceased payment of the benefits on the ground that Ms Alimanovic and her eldest daughter were excluded from entitlement to the allowances concerned as foreign jobseekers whose right of residence arose solely out of the search for employment). Secondly, the host Member State is not obliged to grant maintenance aid for studies, including vocational training, consisting in student grants or student loans to persons who are not economically active or permanent residents. This second derogation to the principle of equal treatment must be read, however, in light of Case C-209/03 R, on the application of Bidar v London Borough of Ealing and Secretary of State for Education and Skills [2005] ECR I-2119.

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ca ple The Bidar case concerned a French national who accompanied his mother who underwent m exa medical treatment in the United Kingdom. He lived there with his grandmother as her dependant and pursued and completed his secondary education. When he started a course in economics at University College London, he received assistance with respect to tuition fees but was refused assistance to cover his maintenance costs in the form of a student loan, on the ground that he was not settled in the United Kingdom. After re-iterating 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 Treaty for the purposes of the prohibition of discrimination laid down in the first paragraph of Article [18 TFEU,] the Court observed that the condition requiring an applicant for that assistance to be settled in the United Kingdom and requiring him to have resided there prior to his studies is likely to be more easily satisfied by United Kingdom nationals. Such difference in treatment may be justified only on the basis of objective factors other than the nationality of the applicants and if it is proportionate to the legitimate aim of the national provisions. Member States certainly have the right to ensure that the assistance granted to students from other Member States to cover their maintenance costs does not become an unreasonable burden on their social assistance system and, for that purpose, may require that students have demonstrated a certain degree of integration into the society of that State (paras 56–57). Drawing a clear distinction between this degree of integration into the host State and a link with the employment market of that State, the Court stated that the fact that a student has resided in the host Member State for a certain length of time is sufficient to establish such degree of integration (para 59). Consequently, the Court ruled that [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 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. (para 63)

By contrast with Bidar, in which the grant of a student loan to a national of a Member State was made conditional on his being settled in the United Kingdom, in Case C-158/ 07 Förster v Hoofddirectie van de Informatie Beheer Groep [2008] ECR I-8507, the Dutch legislation provided that students who were nationals of another EU Member State were eligible for a maintenance grant if they had been lawfully resident in the Netherlands for an uninterrupted period of at least five years prior to their application. Such requirement of residence was not applicable to Dutch students however. The Court of Justice considered that such a requirement of five years’ uninterrupted residence was appropriate, could not be held to be excessive and, being applied on the basis of clear criteria known in advance, did not go beyond what was necessary in order to guarantee that applicants for the maintenance grant were integrated into Dutch society (paras 52–59). The Court concluded that … a student who is a national of a Member State and travels to another Member State to study there can rely on the first paragraph of Article [18 TFEU] in order to obtain a maintenance grant where he or she has resided for a certain duration in the host Member State. The first paragraph of Article [18 TFEU] does not preclude the application to nationals of other Member States of a requirement of five years’ prior residence. (para 60)

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This reference to a five-year period of residence seems to reflect the wording of Article 24(2) of the Citizenship Directive – to which the Court made a specific reference in paragraph 55 of this ruling even though it was not applicable to the facts of this case – which clearly provides that there is no obligation to grant maintenance assistance to students ‘prior to acquisition of the right of permanent residence’ which is granted, under Article 16(1), to Union citizens who have legally resided in the host Member State for a continuous period of five years (see 20.3.3.2). However, as the Court stresses, this does not stop Member States, that wish to do so, from awarding maintenance grants to students from other Member States who do not fulfil the five-year residence requirement (para 59). Article 18 TFEU: no discrimination on the ground of nationality Article 24(1) of the Citizenship Directive: equal treatment with nationals of the host Member State for all EU migrants and their family members Article 24(2) of the Citizenship Directive: no obligation for Member State to grant social assistant during first three months of residence or during longer period of employment search; no obligation during the first five years of residence to grant maintenance grants for studies, student grants and loans to economically inactive persons

Figure 20.5 Equal treatment

20.5 Limits to free movement rights As Article 21 TFEU provides, the right to move and reside freely within the territory of the Member States is ‘subject to the limitations and conditions laid down in the Treaties and by the measures adopted to give them effect’. Also provided for in Article 45(3) TFEU regarding the free movement of workers and Article 52(1) TFEU on free establishment, those limitations are further confirmed in Article 27 of the Citizenship Directive with regard to all EU citizens. This is a reminder that, according to international law, Member States still have discretion to refuse access to, or deport from, their territory nationals of other Member States. However, regulated by EU legislation and supervised by the Court of Justice, such discretion is not unlimited, thus differentiating the status of EU citizens from that of non-EU nationals.

20.5.1 Conditions of application Because of the contingent character and imprecise nature of the grounds on which restrictions to free movement may be relied upon by Member States, notably public policy and public security, the Court has consistently pointed out, as it recalled in Jipa, that … while Member States essentially retain the freedom to determine the requirements of public policy and public security in accordance with their national needs, which can vary from one Member State to another and from one

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era to another, the fact still remains that, in the [Union] context and particularly as justification for a derogation from the fundamental principle of free movement of persons, those requirements must be interpreted strictly, so that their scope cannot be determined unilaterally by each Member State without any control by the [Union] institutions … (para 23) As a result, a number of conditions must be satisfied by national authorities when applying Article 27 of the Citizenship Directive. First, as is the case with Article 36 TFEU derogations to the free movement of goods (see 14.2.1.2), those grounds for derogation cannot be ‘invoked to serve economic ends’. This is now clearly enshrined in Article 27(1), second sentence. Secondly, a measure restricting the right of freedom of movement may be justified only if it respects the principle of proportionality (see Joined Cases C-259/91, C-331/91 and C-332/91 Allué and others v Università degli studi di Venezia and Università degli studi di Parma [1993] ECR I-4309, para 15; Case C-413/99 Baumbast and R v Secretary of State for the Home Department [2002] ECR I-7091, para 91; Olazabal, para 43 and Jipa, para 29). This settled case law of the Court was formally incorporated into Article 24(2), first sub-paragraph. Last, but not least, such a measure must be based on a fair balance between legitimate national interests ‘in compliance with the general principles of EU law and, in particular, by taking proper account of respect for fundamental rights …’ (eg, the protection of family life as in Joined Cases C-482/01 and C-493/01 Orfanopoulos and Others and Oliveri v Land Baden-Württemberg [2004] ECR I-5257, para 100).

20.5.2 Grounds for justification Three grounds of justification are mentioned in Article 27(1): Subject to the provisions of this Chapter, Member States may restrict the freedom of movement and residence of Union citizens and their family members, irrespective of nationality, on grounds of public policy, public security or public health … 20.5.2.1

Public policy and public security Public policy is, in general, interpreted as preventing the disturbance of social order, while public security covers both internal and external security with the view to preserving the integrity of the territory of a Member State and its institutions (see Cases C-423/98 Albore [2000] ECR I-5965, paras 18–24 and C-285/98 Kreil v Germany [2000] ECR I-69, paras 15–17). Article 27(2) provides a strict frame of interpretation and states: Measures taken on grounds of public policy or public security … shall be based exclusively on the personal conduct of the individual concerned. Previous criminal convictions shall not in themselves constitute grounds for taking such measures. The personal conduct of the individual concerned must represent a genuine, present and sufficiently serious threat affecting one of the fundamental interests of society. Justifications that are isolated from the particulars of the case or that rely on considerations of general prevention shall not be accepted. The Court’s case law has always made it clear that the assessment of a threat to public policy, in addition to the perturbation of the social order resulting from a

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breach of the law, can only be based on the personal conduct of the individual whose free movement is restricted (as provided under Article 3(1) of former Directive 64/221/ EEC on the co-ordination of special measures concerning the movement and residence of foreign nationals which are justified on grounds of public policy, public security or public health ([1964] OJ L56/850)). The concept of ‘personal conduct’ was first examined in the early Case 41/74 Van Duyn v Home Office [1974] ECR 1337, in which the Court considered that the fact that an individual was associated with a body or an organisation (here the Church of Scientology) whose activities were regarded as socially harmful without being unlawful in the host Member State (here the UK), amounted to personal conduct of that individual ‘despite the fact that no restriction [was] placed upon [UK nationals] who [wished] to take similar employment with these same bodies or organizations’ (para 24). Although this very wide interpretation of ‘personal conduct’ was controversial and criticised, the idea itself that measures taken on the ground of public policy or security must be based on ‘personal conduct’ was confirmed in Case 67/74 Bonsignore v Oberstadtdirektor der Stadt Köln [1975] ECR 297. In paragraph 6, the Court ruled: As departures from the rules concerning the free movement of persons constitute exceptions which must be strictly construed, the concept of ‘personal conduct’ expresses the requirement that a deportation order may only be made for breaches of the peace and public security which might be committed by the individual affected. In this respect, EU migrants may not be denied residence solely on the ground that their conduct is considered to be contrary to public policy by reason of the fact that they exercise activities which are ‘suspect from the point of view of morals’, notably if such activities when attributable to the State’s own nationals do not give rise to repressive measures (see Joined Cases 115 and 116/81 Adoui v Belgium and City of Liège; Cornuaille v Belgium [1982] ECR 1665: waitresses in a bar working as prostitutes). Equally, as provided in Article 27(2), first sub-paragraph, previous convictions cannot automatically be regarded as personal conduct and therefore constitute ground for measures restricting free movement. This is illustrated in Case 131/79 R v Secretary of State for Home Affairs, ex parte Santillo [1980] ECR 1585, which concerned a deportation order made four years after the recommendation for deportation from the UK against an Italian migrant who had been sentenced to eight years’ imprisonment for serious offences. Confirming its ruling in Case 30/77 R v Bouchereau [1977] ECR 1999 (para 27), the Court stressed that a national criminal court had to take into consideration the provisions of Article 3 of former Directive 64/221/EEC (now Article 27(2) of the Citizenship Directive) ‘inasmuch as the mere existence of criminal convictions may not automatically constitute grounds for deportation measures’ (para 17). However, as observed in Bouchereau: The existence of a previous criminal conviction can, therefore, only be taken into account in so far as the circumstances which gave rise to that conviction are evidence of personal conduct constituting a present threat to the requirements of public policy. (para 28) Such threat to public policy must also be, according to Article 27(2), second subparagraph, ‘a genuine, present and sufficiently serious threat affecting one of the fundamental interests of society’. This requirement reflects the interpretation by the Court of Justice of former Directive 64/221/EEC, notably in (para 28), Bouchereau

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(para 35), Case C-348/96 Criminal proceedings against Calfa [1999] ECR I-11 (automatic expulsion for life of an Italian national from Greece following a criminal conviction without any consideration of her personal conduct or of the danger to public policy she might represent) and Orfanopoulos and Oliveri (para 66).

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ca ple The Oliveri case concerned a deportation order against an Italian national from Germany. m exa Mr Oliveri was born in Germany and had resided in Germany since his birth. A drug addict, he became infected with HIV and chronic hepatitis C. Following numerous offences, notably thefts and illegal sale of narcotics, he was sentenced to imprisonment in November 1999 and again in April 2000 after he interrupted his treatment in hospital during which his sentence had been suspended. Following a number of warnings, his expulsion was ordered in August 2000 on the basis of the frequency and seriousness of his offences and of the real risk of reoffending in the future because of his dependency on drugs. He was threatened with deportation to Italy without a time limit being fixed for his voluntary departure. Mr Oliveri challenged the deportation order before the administrative court of Stuttgart. In a preliminary ruling, the Court re-iterated that measures of public policy cannot be justified by previous criminal convictions in themselves and must be based exclusively on the personal conduct of the individual concerned, representing a genuine and sufficiently serious threat to the requirements of public policy affecting one of the fundamental interests of society (para 66), before affirming that ‘the requirement of the existence of a present threat must, as a general rule, be satisfied at the time of the expulsion’ (para 79, emphasis added). The requirement that such conduct must represent a genuine, present threat affecting one of the fundamental interests of society or of the host Member State ‘implies, in general, the existence in the individual concerned of a propensity to act in the same way in the future’ (see Case C-348/09 PI v Oberbürgermeisterin der Stadt Remscheid EU:C:2012:300, para 30 and Case C-193/16 E v Subdelegación del Gobierno en Álava EU:C:2017:542, para 23). In E v Subdelegación del Gobierno en Álava, E, an Italian national, had been made the subject of an expulsion of order from the territory of Spain, with a 10-year entry ban, on the ground that he had been sentenced by three final judgments to 12 years’ imprisonment for repeated offences of child abuse, which he was serving in a prison facility with several years left to serve before being released. Generally, the fact that a person is imprisoned at the time the expulsion decision is adopted, and that that person has no prospect of being released for several years, cannot be regarded as relating to the personal conduct of this person. However, Article 33(1) of the Citizenship Directive also provides for the possibility for Member States to deport a person sentenced to a custodial sentence if it is clear that this person’s conduct represents a genuine, present threat affecting one of the fundamental interests of the society of that Member State. As a result, as the Court put it in E, the fact that a person is imprisoned at the time the expulsion decision was adopted, without the prospect of being released in the near future, does not exclude that his conduct represents, as the case may be, a present and genuine threat for a fundamental interest of the society of the host Member State. (para 27) A restriction on the freedom of movement and residence of an EU citizen (or a national of a non-EU country who is a family member of such a citizen) may fall within the scope of the concept of public policy or public security if that citizen has been the

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subject, in the past, of a decision denying him refugee status on the ground that there were serious reasons to believe that he committed a war crime or a crime against humanity or was guilty of acts contrary to the purposes and principles of the United Nations (see Joined Cases C-331/16 and C-366/16 K v Staatssecretaris van Veiligheid en Justitie and HF v Belgische Staat EU:C:2018:296, para 47). However, such restriction must be based on a case-by-case assessment of the personal conduct of the individual (para 52) which must show that the persistence of a disposition hostile to the fundamental values of the EU (such as human dignity and human rights) is capable of constituting a genuine, present and sufficiently serious threat, even if it appears unlikely that such crimes or acts may recur outside their specific historical and social context (para 60). Finally, in compliance with the principle of proportionality, such threat to the fundamental interests of the host society must be weighed against the protection of the rights which EU citizens and their family members derive from the Directive and against the fundamental rights, notably the right to respect for private and family life as protected in Article 7 of the Charter of Fundamental Rights of the European Union and Article 8 of the European Convention for the Protection of Human Rights and Fundamental Freedoms (paras 62–63). 20.5.2.2

Public health Restrictions to freedom of movement on the ground of public health may be justified under Article 29 of the Citizenship Directive in the case of … diseases with epidemic potential as defined by the relevant instruments of the World Health Organisation and other infectious diseases or contagious parasitic diseases if they are the subject of protection provisions applying to nationals of the host Member State. Former Directive 64/221/EEC provided a list of those diseases, which included tuberculosis, syphilis, infectious diseases or contagious parasitic diseases, diseases and disabilities which might threaten public policy or public security, drug addiction, profound mental disturbance and other mental illnesses. Member States refused to add AIDS to this list and the Citizenship Directive simply refers to diseases defined in the ‘relevant instruments of the World Health Organisation’. Under Article 29(2), this ground of derogation may not be relied upon, however, by a Member State if the disease has occurred three months after the EU migrant has entered its territory. Nonetheless, within three months of the date of arrival, provided there are serious indications that it is necessary, EU migrants may be required to undergo, free of charge, a routine medical examination to certify that they are not suffering from any of those diseases (Article 29(3)).

20.5.3 Protection against restrictive measures Even if the existence of a threat to public policy is established, national authorities must still take account of a number of safeguards protecting migrants. 20.5.3.1

Protection against expulsion Normal protection Prior to taking an expulsion decision on grounds of public policy or public security, the personal and family situation of the migrant concerned must be assessed carefully in

The Free Movement of European Citizens



497

order to ensure that the envisaged measure is appropriate and proportionate (see Orfanopoulos, para 100). To that effect, Article 28(1) of the Citizenship Directive provides an indicative list of factors to be taken into account, such as: • length of residence in the host Member State; • age and state of health of the migrant; • family and economic situation; • social and cultural integration into the host Member State; and • the extent of the migrant’s links with the country of origin. (See PI, 20.5.2.1 above, para 32 and K and HF, 20.5.2.1 above, para 76.) Enhanced protection Article 28(2) and (3) offers increased protection against expulsion to EU migrants and their EU or non-EU family members who are permanent residents. Under Article 28(2), expulsion measures can only be taken ‘on serious grounds of public policy or public security’ against individuals who have resided in the host State between five and 10 years; and, under Article 28(3), ‘on imperative grounds of public security’ (but not public policy) against individuals who have resided in the host State for the previous 10 years (Article 28(3)(a)), and children provided the expulsion is necessary for their best interests (Article 28(3)(b)). Article 28(3)(a) of Directive 2004/38 is not applicable to a European Union citizen who does not have a right of permanent residence in the host Member State within the meaning of Article 16 and Article 28(2) of the Directive (see Joined Cases C-316/16 and 424/16 B v Land Baden-Württemberg and Secretary of State for the Home Department v Vomero EU:C:2018:256, para 61 and K and HF, 20.5.2.1 above, para 77). The condition of having ‘resided in the host Member State for the previous 10 years’ must be assessed at the date on which the initial expulsion decision is adopted (see B (above), para 95). The expulsion decision must be taken on a clear distinction between normal, ‘serious’ and ‘imperative’ grounds. In Case C-145/09 Land Baden-Württemberg v Tsakouridis [2010] ECR I-11979, the Court defined the concept of ‘imperative grounds of public security’ as one that … presupposes not only the existence of a threat to public security, but also that such a threat is of a particularly high degree of seriousness, as is reflected by the use of the words ‘imperative reasons’. (para 41) This concept is therefore much stricter than that of ‘serious grounds’ within the meaning of Article 28(2), thus reflecting the clear intention of the European Union legislature to limit measures based on Article 28(3) to ‘exceptional circumstances’. Indeed, as recital 24 of the preamble to the Citizenship Directive states: … the greater the degree of integration of Union citizens and their family members in the host Member State, the greater the degree of protection against expulsion should be. Only in exceptional circumstances, where there are imperative grounds of public security, should an expulsion measure be taken against Union citizens who have resided for many years in the territory of the host Member State, in particular when they were born and have resided there throughout their life. However, in PI, in which it was unclear to the German referring court whether the sexual offences against a 14-year-old girl committed by Mr I, an Italian national, might

498

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EU Law

be covered by the concept of ‘imperative grounds of public security’, the Court of Justice interpreted Article 28(3)(a) of the Directive as leaving it open to the national courts to decide whether criminal offences such as those mentioned in the second subparagraph of Article 83(1) TFEU (terrorism, trafficking in human beings and sexual exploitation of women and children, illicit drug trafficking, illicit arms trafficking, money laundering, corruption, counterfeiting of means of payment, computer crime and organised crime) constitute … a particularly serious threat to one of the fundamental interests of society, which might pose a direct threat to the calm and physical security of the population and thus be covered by the concept of ‘imperative grounds of public security’, capable of justifying an expulsion measure under Article 28(3), as long as the manner in which such offences were committed discloses particularly serious characteristics, which is a matter for the referring court to determine on the basis of an individual examination of the specific case before it. (para 33) Nonetheless, should an expulsion measure against Mr I be justified, the national court would still have to comply with the usual procedural requirements and safeguards imposed under EU law. With regard to the calculation of the 10-year period of residence, the Court ruled in Case C-400/12 Secretary of State for the Home Department v G EU:C:2014:9 that a period of imprisonment is, in principle, capable both of interrupting the continuity of the period of residence and of affecting the decision regarding the grant of the enhanced protection provided for thereunder, even where the person concerned resided in the host Member State for the 10 years prior to imprisonment. (para 38) However, the Court added in the same paragraph that the fact that that person resided in the host Member State for the 10 years prior to imprisonment may be taken into consideration as part of the overall assessment required in order to determine whether the integrating links previously forged with the host Member State have been broken. All relevant aspects of that assessment must notably include, among others, the strength of the integrative links forged with the host Member State before the detention of the person concerned, the nature of the offence that resulted in the period of detention imposed, the circumstances in which that offence was committed and the conduct of the person concerned throughout the period of detention. (see B (above), para 83) 20.5.3.2

Procedural requirements and safeguards Union citizens and their family members are also protected by a number of procedural requirements and safeguards. Notification in writing Article 30(1) of the Citizenship Directive requires that the persons against whom a decision of refusal of entry or deportation is taken must be notified in writing ‘in such a way that they are able to comprehend its content and the implications for them’. The national authorities must therefore take every appropriate measure to ensure that those persons understand the content and implications of a decision adopted under Article 27(1) of the 2004 Directive. However, unless an application is expressly made to

The Free Movement of European Citizens



499

that effect, it is clear from the wording of Article 30(1) and from the preparatory works that there is no requirement that this decision be notified in a language they understand or which it is reasonable to assume they understand (see Case C-184/16 Petrea v Ypourgou Esoterikon kai Dioikitikis Anasygrotisis EU:C:2017:684, paras 69– 72). Decisions must be fully reasoned and specify the factual and legal grounds on which they are taken to enable individuals concerned to take effective steps to prepare their defence (see Rutili, paras 37–39), ‘unless this is contrary to the interests of State security’ (Article 30(2); see Case C-300/11 ZZ v Secretary of State for the Home Department EU:C:2013:363). The notified decision must also specify the court or administrative authority with which an appeal may be lodged and the time limit for that appeal, and the time allowed for the person concerned to leave the territory of the Member State (Article 30(3)). Access to judicial redress According to Article 31(1) and (2) of the Citizenship Directive, access to judicial and, where appropriate, administrative redress procedures to appeal or seek review of any decision based on the grounds of public policy, public security or public health must be made available in the host Member State to the persons concerned (see Case 48/75 Royer [1976] ECR 497, paras 52–62 and Joined Cases C-297/88 and C-197/89 Dzodzi v Belgium [1990] ECR I-3763, para 60), in such a way as to ensure an examination of the legality of the decision, together with that of the facts and circumstances on which the decision is based (Article 31(3)). In the case where an application for an interim order to suspend enforcement of an expulsion decision is made alongside an application for appeal or judicial review against such decision, actual deportation from the territory of the host Member State cannot take place as a general rule until the decision on the interim order is taken (Article 31(2)). This rule suffers three exceptions, however, namely: • where the expulsion decision is based on a previous judicial decision; or • where the person concerned had previous access to judicial review; or • where the expulsion decision is based on imperative grounds of public security under Article 28(3). Finally, Article 31(4) grants the individuals concerned the right to present their defence in person unless their presence ‘may cause serious troubles to public policy or public security or when the appeal or judicial review concerns a denial of entry to the territory’. Exclusion ban Under Article 32(1), expelled Union citizens and their family members who have also been excluded on grounds of public policy or public security can apply to have this ban on entry lifted after a reasonable period of time, and in any event after three years from the enforcement of the final exclusion order. For that purpose, they must demonstrate that the circumstances which justified the exclusion order have materially changed. The national authorities of the host State must make a decision on the application within six months of its submission. Expulsion as a legal consequence of a custodial penalty Article 33(1) prohibits expulsion orders being issued as a penalty or legal consequence of a custodial penalty, unless they comply with the requirements of Articles 27, 28 and 29 of the Directive.

500

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EU Law

However, in the case of such an expulsion order being enforced more than two years after being issued, Article 33(2) provides that the host Member State has an obligation to check that the person concerned is currently and genuinely a threat to public policy or public security before the expulsion takes place. Also, the State must assess whether the circumstances of the person concerned have materially changed since the expulsion order was adopted. Measures restricting free movement

Protection against restricting measures

taken on grounds of public policy, public security or public health (Art 27 of the Citizenship Directive)

Normal and enhanced protection against expulsion (Art 28 of the Citizenship Directive)

based on personal conduct (no previous criminal convictions alone)

Notification of decision in writing (Art 30 of the Citizenship Directive

representing a genuine, present and sufficiently serious threat affecting the fundamental interests of society

Access to judicial redress (Art 31 of the Citizenship Directive) Lifting of exclusion orders (Art 32 of the Citizenship Directive)

refusal to enter or expulsion and/or exclusion order

Prohibition of expulsion orders as penalty or legal consequence (Art 33(1) of the Citizenship Directive)

Figure 20.6 Restrictions to free movement

20.6 Further reading Benlolo Carabot M, ‘Citizenship, integration, and the public policy exception: B and Vomero and K. and H.F.’ (2019) 56 CML Rev 771. Blauberger M et al, ‘ECJ Judges read the morning papers. Explaining the turnaround of European citizenship jurisprudence’ (2018) 25(10) Journal of European Public Policy 1422. Damjanovic D, ‘Joined cases C-22/08 and C-23/08, Athanasios Vatsouras (C-22/08) and Josif Koupatantze (C-23/08) v Arbeitsgemeinschaft (ARGE) Nürnberg 900, Judgment of the Court (Third Chamber) of 4 June 2009, not yet reported’ (2010) 47 CML Rev 847. Ellis E, ‘Social Advantages: A New Lease of Life?’ (2003) 40 CML Rev 639. Hyltén-Cavallius K, ‘Who Cares? Caregivers’ Derived Residence Rights from Children in EU Free Movement Law’ (2020) 57 CML Rev 399. Iliopoulou-Penot A, ‘Deconstructing the Former Edifice of Union Citizenship? The Alimanovic judgment’ (2016) 53 CML Rev 1007. Kochenov D and Belavusau U, ‘Same-Sex Spouses: More free movement, but what about marriage? Coman’ (2020) 57 CML Rev 227. O’Brien C, ‘Social Blind Spots and Monocular Policy Making: The ECJ’s Migrant Worker Model’ (2009) 46 CML Rev 1107. O’Brien C, ‘Real Links, Abstract Rights and False Alarms: the Relationship Between the ECJ’s “Real Link” Case Law and National Solidarity’ (2008) 33(5) EL Rev 643. O’Brien C, ‘The ECJ Sacrifices EU Citizenship in Vain: Commission v United Kingdom’ (2017) CML Rev 209.

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Mathisen G, ‘Consistency and Coherence as Conditions for Justification of Member States Measures Restricting Free Movement’ (2010) 47 CML Rev 1021. Peers S, ‘Free Movement, Immigration Control and Constitutional Conflict’ (2009) 5 European Constitutional Law Review 173. Polak PR, ‘A Commentary on the Lounes Case and the Protection of EU Citizens’ Rights Post-Brexit’ (2018) 44 Revista General de Derecho Europeo 190. Selanec N and Bell C, ‘Who Is a “Spouse” under the Citizens’ Rights Directive? The Prospects of Mutual Recognition of Same-sex Marriages in the EU’ (2016) 41(5) EL Rev 655. Spaventa E, ‘Family Rights for Circular Migrants and Frontier Workers: O and B, and S and G. Case C-456/12, O v. Minister voor Immigratie, Integratie en Asiel and Minister voor Immigratie, Integratie en Asiel v. B, EU:C:2014:135; and Case C-457/ 12, S v. Minister voor Immigratie, Integratie en Asiel and Minister voor Immigratie, Integratie en Asiel v. G, EU:C:2014:136, Judgments of the Court (Grand Chamber) of 12 March 2014’ (2015) 52 CML Rev 753. Spaventa E, ‘The Rights of Citizens under the Withdrawal Agreement: a Critical Analysis’ (2020) 45(2) EL Rev 193. Staiano F, ‘Derivative Residence Rights for Parents of Union Citizen Children under Article 20 TFEU: Chavez-Vilchez’ (2018) 55 CML Rev 225. Thym D, ‘Case Comment - When Union Citizens turn into Illegal Migrants: The Dano Case’ (2015) 40(2) EL Rev 249. Thym D, ‘The Elusive Limits of Solidarity: Residence Rights of and Social Benefits for Economically Inactive Union Citizens’ (2015) 52 CML Rev 17. Tryfonidou A, ‘In Search of the Aim of the EC Free Movement of Persons Provisions: Has the Court of Justice Missed the Point?’ (2009) 46 CML Rev 1591. Verschueren H, ‘Preventing “Benefit Tourism” in the EU: A Narrow or Broad Interpretation of the Possibilities Offered by the ECJ in Dano?’ (2015) 62 CML Rev 363. White R, ‘Revisiting Free Movement of Workers’ (2010) 33 Fordham International Law Journal 1564. Wiesbrock A, ‘Free Movement of Third-Country Nationals in the European Union: The Illusion of Inclusion’ (2010) 35(4) EL Rev 455.

Summary

ry ma sum

One of the European Union’s main objectives is to ‘offer its citizens an area of freedom, security and justice without internal frontiers’ within which all EU citizens, economically active or not, and their family members, irrespective of nationality, can enjoy the right to move and reside freely in another Member State than their own. This right is enshrined in Article 21 TFEU and further guaranteed in Directive 2004/ 38/EC (the Citizenship Directive). While the right to move can be exercised without many formalities, residence rights are variable according to the duration of residence and according to the category of beneficiaries within which the European migrant falls. Once legally resident, European migrants are in principle entitled to enjoy the same treatment as the nationals of the host State, except in situations clearly defined in the Citizenship Directive. Nevertheless, the right to freedom of movement may be subject to limitations and conditions under Treaty and secondary legislation provisions. Freedom of movement

502



EU Law

may be restricted on the grounds of public policy, public security and public health under certain conditions laid down by the Citizenship Directive and the case law of the Court of Justice. Furthermore, procedural requirements and safeguards are in place to protect EU migrants and their family members against disproportionate national measures restricting their right to free movement and residence.

Test Your Knowledge

r you ge t s d te wle kno

1

Cristiano is a Spanish citizen. Wanting to take advantage of the opportunities available in Germany, he decides to migrate to Berlin with Thassya, his Colombian partner, Giulietta, their child aged 15, and Joaquim, aged 19, who is Thassya’s son from a previous relationship and who has dual Colombian and Spanish nationality. (a) (b)

2

Giovanni is an Italian citizen who decided to migrate from Italy to Germany with Fernanda, his Brazilian partner, and João, aged 19, who is Fernanda’s son from a previous relationship and who has dual Brazilian and Italian nationality. In Italy, João was arrested for dealing in Class B drugs a couple of years earlier. He was charged and convicted of the possession and use of illegal substances. Once in Germany, João wishes to attend university in Berlin and take advantage of both a tuition fee and maintenance fee grant available to German students studying at university. Although he has never worked in Italy, João also wishes to claim the German job-seeker’s allowance before he starts at university. (a)

(b) 3

4

What are Cristiano’s and Thassya’s free movement and equality rights? What are the children’s rights?

Can the German authorities refuse entry to João on the ground of his past criminal conviction? What would be his procedural rights against a decision of refusal of entry into Germany? What are João’s rights to benefits and to university education, should he be allowed to enter Germany?

Victor, a Danish national, entered France at the beginning of the year, having accepted the position in Paris of assistant editor of La Taupe, a radical political journal. The association that publishes La Taupe is a non-profit-making organisation, which finances the journal through donations and subscriptions. Last month, Victor was arrested whilst lying across a road in protest against cuts in the French health service. He was charged with obstruction, found guilty and the tribunal correctionnel of Paris recommended deportation. To make things worse, Elisa, Victor’s older daughter from a previous relationship, wanted to move to Paris after being offered a job as a translator of English and Danish language scientific papers into French but was refused entry by the French authorities on the ground that she had two convictions in Denmark for possession of cocaine. Advise Victor and Elisa as to their respective rights to stay in and enter France and their related procedural rights under EU law. ‘Read together with a series of follow-up cases, however, the Dano judgment marks a striking break in the ECJ’s – previously expansive – interpretation of EU citizens’ rights to receive social benefits abroad.’ (Blauberger M et al, ‘ECJ Judges read the morning papers. Explaining the turnaround of European citizenship jurisprudence’ (2018) 25(10) Journal of European Public Policy 1422) Discuss.

Index



503

INDEX abuse of dominant position 363–4, 390–1 collective or joint dominance 393 concept of abuse 396 dominance in a substantial part of the internal market 394–5 market power 391–4 types of abuse 396–402 accountability 66 acquis communautaire 6, 43 action for annulment see annulment of EU acts action for damages 190–6 advisory bodies 29–30 Advocates General (AGs) 128–9, 131, 132 alcoholic beverages 212, 238–40, 242, 253–5, 256–7, 260–1, 269–70, 291 beer 239–40, 256, 262–3, 291–2 wine 237–8, 239–40, 273 animals: protection of health and life 280–5 annulment of EU acts 163 effect of annulment 182–3 grounds of review 166 infringement of an essential procedural requirement 167–8 infringement of the Treaty or rule relating to its application 168–70 lack of competence 166–7 misuse of powers 170–1 locus standi 173 non-privileged applicants 173–82 privileged applicants 173 semi-privileged applicants 173 reviewable acts 163–6 time limits 171–2 anti-competitive agreements 363–4 exemptions 382–3 block exemptions 378, 387–90 fair share for consumers 384–5 no indispensable restrictions 386 no substantial elimination of competition 386–7 objective benefits 383–4 forms of collusion 365, 371 concerted practices 368–71 decision by associations of undertakings 368, 371 joint intention 365–8, 371

anti-competitive agreements – continued horizontal restraints 364, 378–80, 381, 387, 388 interference with competition 372 block exemption regulations 378 market share: de minimis doctrine 376–7 object or effect of the agreement or practice 372–5, 378 prevention, restriction or distortion of competition 375–8 nullity of a restrictive agreement 381–2 vertical restraints 364, 378–9, 380–1, 387, 388, 390 architects 323 barriers to trade 201, 202, 209 see also free movement of goods; internal market justification for see derogations beer 239, 240, 256, 262–3, 291–2 ‘Brexit’ 3, 14–15 Brussels 19 BSE-infection 295 budget 22, 27, 69 cars engine size 241 steering wheels 293 technical requirements 256 case law 56 case numbers and citations 134 status of EU citizens 447, 452–60 treaty derogations 289–97 Cassis de Dijon 254–6, 265, 270, 289–94 CE mark 219 Charter of Fundamental Rights of the European Union 13, 57–9, 178 cheese 262, 273, 282 children citizenship 452–5, 457–9, 460 social rights and benefits 488 Churchill, Sir Winston 3 citizenship see European citizenship Citizenship Directive 474–500 collusion see anti-competitive agreements comitology system 49, 69, 70

504



EU Law

commercial property protection of 285–8 Commission 8, 19 constitution and appointment 19–21 decision to act upon infringements of EU law 102–3 see also enforcement imposition of financial penalties 112–17 pre-judicial phase 103–6 enforcement of competition rules 422–7 cooperation with national competition authorities 428–9 cooperation with national courts 427–8, 429–30 role 21–3 Committee of the Regions 30 common market 8 internal market and 203–4 comparative law 137 competences 33, 35 enhanced cooperation procedure 36–7 exclusive competences 36 limits to 37 powers and 34–5 proportionality 40–1, 65 subsidiarity 37–40, 65 shared competences 36 supportive competences 36 competition law 337–8 abuse of dominant position see abuse of dominant position anti-competitive agreements see anti-competitive agreements block exemption regulations (BERs) 378, 387–90 concentrations 363–4, 394 appraisal 409–11, 412 definition 406–8 Union dimension 408–9, 412 concept of ‘undertaking’ 338 economic nature of the activity 339–41 insurance, pension and social security 342–4 irrelevance of form or legal status 338–9 liberal professions 341–2 single economic entity 344–7 ‘effect on trade between Member States’ 356 agreements or abuses covering one, or part of a single Member State 359–60 appreciability 359, 360 definition and interpretation of the concept 357–8, 360 purpose of the concept 356–7, 360 European Competition Network (ECN) 417 national competition authorities (NCAs) 417, 428–9 non-EU firms 418–20 private enforcement 417, 432 consensual dispute resolution 439–40 Directive 2014/104/EU: actions for damages 435– 40 disclosure of evidence 438 joint and several liability 438

competition law – continued limitation periods 437–8 national courts 433 passing-on defence 438–9 proof of a breach of competition rules 437 quantification of harm 439 right to full compensation 436 temporal application 440 prohibition of discriminatory internal taxation 238–40 public enforcement 417 Commission decisions 425–6 cooperation between the Commission and national competition authorities 428–9 cooperation between the Commission and national courts 427–8, 429–30 enforcement of Articles 101 and 102 TFEU 421–31 hearings and professional secrecy 425 investigation by the Commission 422–5, 427 modernisation of European competition law 420–1 penalties 426–7 review of enforcement under Regulation 1/2003 430–1 role of the Commission 422–7 relevant market see market definition territoriality principle 418–20 Treaty provisions Article 101 TFEU 363, 364–90, 421–31 Article 102 TFEU 363, 391, 395–404, 421–31 concentrations 363–4, 394 appraisal 409–11, 412 definition 406–8 Union dimension 408–9, 412 concerted practices 368–71 conferral principle 33–4, 46 constitutional framework 75 consular protection 465–6 consultation 38, 68 consumer protection 315, 322, 338, 384–6 contextual interpretation 136 cooperation 63–4 enhanced cooperation procedure 36–7 judicial 143 Services Directive 315 sincere cooperation 80–1, 95, 121, 149 COREPER 25 Council 8, 21 configuration 23–4 COREPER 25 function 24 voting procedures 25–6 Council of Europe 3 Court of First Instance (CFI) 127, 134 Court of Justice of the European Union (CJEU) 4, 127–8 Advocates General (AGs) 128–9, 131, 132 aims and roles 129–30 case law 56

Index

Court of Justice of the European Union (CJEU) – continued case numbers and citations 134 status of EU citizens 447, 452–60 treaty derogations 289–97 chambers 128 court system Court of Justice 127 General Court 127, 134–5 national courts see national courts specialised courts 127, 135 customs agents 341–2 deliberations 132–3 enforcement proceedings 107–8 see also enforcement defences 108–10 effect of the Court’s ruling 112 interim measures 110–11 Judge-Rapporteur 132 judges 128 judgments 133 judicial activism 140–1 judicial proceedings 131–3 jurisdiction 130–1, 134, 138–9 legal provisions relating to 128 methods of interpretation 135–8, 136 official languages 131, 133 orders and opinions 133–4 preliminary reference to see preliminary ruling procedure registrar and staff 129 supervision of EU institutions see judicial supervision Customs Union 8, 224 internal and external aspects 225–6 Union Customs Code 225 Cyprus 6, 7 damages, action for 190–6 competition law 435–40 Dassonville formula 253–4, 263, 265, 266, 271 decisions 53–4 direct effect 91 delegated acts 22, 47, 48–9, 50 democracy 17–18, 63 democratic legitimacy 66 derogations 277 Article 36 TFEU 277–88, 289, 290–2 Article 114 TFEU 288–9 case law of the CJEU first Cassis de Dijon principle 289–94 ‘mandatory requirements’ 290, 292–4 precautionary principle 295–6 protection of fundamental rights 296–7 grounds for justification 279 protection of health and life of humans, animals and plants 282–5



505

derogations – continued protection of industrial and commercial property 285–8 public morality 279–80 public policy 279, 280–1 public security 279, 281–2 diplomatic protection 465–6 direct effect 85–6, 117 EU acts 87 decisions 91 directives 88–91 regulations 87–8, 89–90 general principles approach 96–8 horizontal 87, 89, 90 circumventing the lack of 93–8 incidental effect 96 international agreements 92–3 Treaty provisions 46, 87 triangular situations 95 vertical 87, 89, 90 directives 52–3 direct effect 88–91 circumventing the lack of horizontal direct effect 93–8 domestic courts 120–2, 143 enforcement of competition rules private enforcement 433 public enforcement 427–8, 429–30 reference to the CJEU see preliminary ruling procedure uniform application of EU law 143–4 dominance see abuse of dominant position dual nationality 451 Economic and Monetary Union (EMU) 10–11 future proposals 11–13 effectiveness principle 81, 111, 121 effet utile 137 enforcement Commission’s decision to act 102–3 EU Pilot Scheme 104 financial penalties 112–17 judicial phase 107–8 defences 108–10 effect of the Court’s ruling 112 interim measures 110–11 Member State liability 117 author of the violation: definition of a State 118–19 background to and rationale of the principle (Francovich) 117–18 development of the principle (Factortame) 119–20 procedural autonomy and domestic responsibilities 120–2 pre-judicial (administrative) phase formal phase 104–5 informal phase 103–4 reasoned opinion 105–6

506



EU Law

enforcement – continued reparations 121 Treaty basis 101–2 enhanced cooperation procedure 36–7 enlargement 6, 13 environmental protection 205, 292–3 equal treatment see non-discrimination equivalence principle 121, 255 EU law 43–4 acquis communautaire 6, 43 action for annulment see annulment of EU acts case law of the CJEU see case law direct effect see direct effect enforcement see enforcement fundamental rights 57–9, 296–7 Charter of Fundamental Rights of the European Union 13, 57–9, 178 European Convention on Human Rights 3, 59 general principles 56–7, 96–8 harmonisation of national legislation see harmonisation implementation 92 incidental effect 96 indirect effect 93–4, 140 international agreements 24, 59–60 interpretation 135–8, 136 consistent 92 judicial supervision see judicial supervision law-making see law-making process primary sources 4, 44–7 secondary sources 44, 47–56 see also directives; regulations binding EU acts: regulations, directions and decisions 51–4 green papers 55 non-binding EU acts: recommendations and opinions 54 see also opinions validity of EU acts 50–1 soft law 54–6 supremacy 75–83, 117 uniform application 143–4 EURATOM 8, 44 euro area 10–11, 29 European Case Law Identifier (ECLI) 134 European Central Bank (ECB) 10, 11, 29 European citizens’ initiative 462–5 European citizenship ambiguous nature 447 children 452–5, 457–9, 460 free movement see free movement of European citizens human rights 448 legal protective rights 465, 468 diplomatic and consular protection 465–6 right to complain to the European Ombudsman 466–7 right to petition the European Parliament 466

European citizenship – continued right to use any EU official language in correspondence with EU institutions and bodies 467–8 national citizenship and 449–51 People’s Europe 447–8 political rights 460, 468 European citizens’ initiative 462–5 right to vote and stand at European and municipal elections 460–2 right of residence 452–60 status of European citizens 451 fundamental status: CJEU case law 447, 452–60 treaty basis 447, 448, 449 European Coal and Steel Community (ECSC) 5, 7–8, 44 European Community (EC) 8, 44 European Constitution 8 European Convention on Human Rights (ECHR) 3, 59, 134 European Council 21, 28 European Court of Auditors 29 European Court of Human Rights 127 European Court of Justice (ECJ) 4, 127 see also Court of Justice of the European Union (CJEU) European Economic Area (EEA) 7, 201 European Economic Community (EEC) 3, 8, 44 European Economic and Social Committee (EESC) 30 European elections 460–2 European Exchange Rate Mechanism 10 European Free Trade Area (EFTA) 201, 214 European Investment Bank (EIB) 30 European Ombudsman 466–7 European Parliament 8 budgetary powers 27, 69 composition 26 control of the Executive 27 functions 27–8 legislative powers 27, 68 official languages 467 redress of individual grievances 27–8 right to litigate 27 right to petition 27–8, 466 European standards organisations (ESOs) 218 European Union (EU) competences see competences constitutional framework 75 eurozone 10–11, 29 Future of Europe (White Paper) 9 institutions see institutional framework liability for damage see extra-contractual liability membership (1950-2013) 5–6 official languages 131, 133, 467 origins 3 creation of international organisations 4–5 deepening cooperation 7–12 motives for European integration 3–4

Index

European Union (EU) – continued widening participation 5–7 powers 33 implied powers 34 principle of conferral 33–4, 46 residual powers 34–5 UK withdrawal 3, 14–15 UK’s attitude towards 3, 13–15 exclusion orders 499–500 exports, quantitative restrictions 272–5 see also free movement of goods expulsion, protection from 496–8 extra-contractual liability 187–8 admissibility of the action 188–90 requirements for a right to damages 190–6 failure to act 183–6 financial crisis 10–11 Fiscal Compact 10–11 free movement 201, 202, 203 see also free movement of European citizens; free movement of goods; freedom to exercise an economic activity free movement of European citizens 471 area of freedom, security and justice 471–2 Lisbon Treaty 473 Schengen agreements 472, 473 equal treatment rights 485–92 EU migrants and family members’ right to free movement and residence 473–4, 482 economically active and inactive EU migrants 474–5 migrants’ family members 475–80 right of entry 481, 482 right of exit 480, 482 right of permanent residence 484–5 right of residence for more than three months 482–4, 485 right of residence for up to three months 482, 485 right to move freely 480 limits to free movement rights 492 conditions of application 492–3 grounds for justification 493 procedural requirements and safeguards 498–500 protection against expulsion 496–8, 500 public health 496 public policy and public security 493–6 free movement of goods 223 abolition of non-tariff barriers 245–7 Cassis de Dijon approach 254–6, 265, 270, 289–94 ‘certain selling arrangements’ 266–8 Dassonville formula 253–4, 263, 265, 266, 271 EU measures 251–2 import licences 256–7 indications of origin 261–2 inspections 257 Keck and Mithouard 265–72



507

free movement of goods – continued market access 269–71 marketing restrictions 263, 265–6 measures caught under Articles 34 and 35 TFEU 248–52 measures favouring or promoting domestic products 257–60 measures having equivalent effect (MHEE) to quantitative restrictions on exports 272–5 measures having equivalent effect (MHEE) to quantitative restrictions on imports 251, 253–72 measures imposing conditions on imported goods only 256 national measures 248–50, 266–72 physical and technical barriers 247–8 price restrictions 260–1 production requirements 261–3 ‘purely internal measures’ 250–1 quantitative restrictions 252–3, 272–5 Customs Union see Customs Union definition of ‘goods’ 226 elimination of tariff barriers 226–7 abolition of customs duties 227–8 charges having equivalent effect (CHEE) to customs duties 228–30, 232, 234, 235 permissible charges 230 charges attached to inspections required under EU law 232–3 charges as fees for services rendered by the Member State 230–2 prohibition of discriminatory internal taxation 234–5, 243 direct discrimination 240–1 genuine tax 235–6 indirect discrimination 240, 241–2 products in competition 238–40 similar products 237–8 treaty derogations see derogations free movement of workers 301 concept of worker European law concept 302–3 work 303–4 workseekers 303–4 teachers 302, 329, 330 worker’s rights 304–6 freedom of establishment and freedom to provide services 309 beneficiaries legal persons 310–12 natural persons 309–10 concept of establishment 306 concept of services 306–9 Services Directive 312 cooperation between Member States 315 free provision of services 314–15 freedom of establishment for providers 313–14 scope of application and exclusions 313 freedom of expression 296–7

508



EU Law

freedom to exercise an economic activity 301 see also free movement of workers; freedom of establishment and freedom to provide services activities falling outside the scope of the freedoms 328 exercise of official authority 331–2 public service 329–31, 332 non-discrimination 96–7, 315–16 access to an economic activity 317–18 prohibition of direct and indirect discrimination 316–17 prohibition of non-discriminatory restrictions 319–22 pursuit of an economic activity 318–19 functional integration 5 fundamental rights 57–9, 296–7 General Court 127, 134–5 genetically modified organisms (GMOs) 295 geographic market 353–5 green papers 55 harmonisation 201, 209 approximation or coordination 210–11 CE mark 219 legal basis 209–10 methods 211 new approach 216 original methods 211–16 mutual recognition see mutual recognition technical harmonisation and standards 213–14 health and life, protection of 282–5, 295–6 health professions 323 health and safety 217 horizontal restraints 364, 378–80, 381, 387, 388 see also anti-competitive agreements human health and life, protection of 282–5, 295–6 human rights Charter of Fundamental Rights of the European Union 13, 57–9, 178 European citizenship 448 European Convention on Human Rights (ECHR) 3, 59, 134 Iceland 7, 201 illegality plea of 186–7 implementing acts 47, 49, 50 implied powers 34 imports parallel imports 286–7 quantitative restrictions 253–72 see also free movement of goods indirect effect 93–4, 140 industrial property protection of 285–8 infringement of proceedings see enforcement inspections 232, 257 institutional balance 65

institutional framework 17 advisory bodies 29–30 democracy 17–18 European Court of Auditors 29 European System of Central Banks 29 see also European Central Bank (ECB) judicial supervision see judicial supervision political institutions 19 Commission see Commission Council see Council European Council 21, 28 European Parliament see European Parliament separation of powers 18–19 insurance funds 342–4 intellectual property rights 286–8 internal market 201–2 see also harmonisation in the 21st century 206–8 common market and internal market 203–4 Completing the Internal Market (White Paper) 202 creation 204–5 economic benefits 206 first 10 years 205–6 key elements 219 international agreements 24, 59–60 direct effect 92–3 international negotiations 23 international organisations 4–5 interpretative methods 135–8, 136 consistent interpretation 92 preliminary ruling see preliminary ruling procedure principle of legal certainty 65, 167, 169, 170 Ireland ‘Buy Irish Campaign’ 248–9, 257–8 Re Irish Souvenirs 290 joint intention 365–8 joint ventures 407–8 Judge-Rapporteur 132 judges 128 judicial activism 140–1 judicial autonomy 81, 143 judicial review, right of individuals to request 173–82 judicial rules of construction 136 judicial supervision 163 annulment see annulment of EU acts extra-contractual liability 188 admissibility of the action 188–90 requirements for a right to damages 190–6 failure to act 183–6 plea of illegality 186–7 Keck and Mithouard 265–72 law-making process 63 adoption of regulatory acts 69–70 ordinary legislative procedure 27, 66–8

Index

law-making process – continued principles accountability 66 cooperation 63–4 democratic legitimacy 66 institutional balance 65 legal certainty 65, 167, 169, 170 proportionality 40–1, 65 simplicity, clarity and consistency 66 subsidiarity 37–40, 65 transparency 65 special legislative procedure 27, 66, 68–9 legal certainty 65, 167, 169, 170 legal profession 307, 323–4, 341 legislative acts 47, 48, 50 legislative proposals 21, 24, 27 liability see extra-contractual liability liberal professions 341–2 Liechtenstein 201 life, protection of 282–5 Lisbon Treaty see Treaty of Lisbon literal interpretation 136 locus standi 173 non-privileged applicants 173–82 privileged applicants 173 semi-privileged applicants 173 Maastricht Treaty (Treaty on European Union) 8, 9, 10, 13, 44, 45, 112 European citizenship 447, 448, 449 maladministration 466–7 market access 269–71 market definition 348 relevant market importance of the concept 348–9, 356 purpose of definition 349–50, 356 relevant geographic market 353–5, 356 relevant product market 350–3, 356 relevant temporal market 355, 356 substitute products 350–1 market dominance see abuse of dominant position market power 391–4 see also abuse of dominant position market share 376–7, 391–2 marketing restrictions 263, 265–6 Marshall Plan 4 medical profession 341 medicinal products 270–1, 284–5, 351 Member States 1950-2013 5–6 enforcement actions against see enforcement membership requirements 6–7 merger control 337 Merger Regulation 405–10, 412 see also concentrations migrant workers see free movement of workers milk 282 mutual recognition 212–16, 322



509

mutual recognition – continued professional qualifications 212, 322–3, 329 architects 323 health professions 323 legal profession 323–4 new approach to harmonisation 324–8 original legislative movement 322–4 national citizenship 449–51 see also European citizenship national competition authorities (NCAs) 417, 428–9 national courts 120–2, 143 enforcement of competition rules private enforcement 433 public enforcement 427–8, 429–30 reference to the CJEU see preliminary ruling procedure uniform application of EU law 143–4 national standards 211–12, 262 NATO (North Atlantic Treaty Organisation) 4 non-discrimination 96–7 free movement of European citizens 485–92 freedom to exercise an economic activity 315–16 access to an economic activity 317–18 prohibition of direct and indirect discrimination 316–17 pursuit of an economic activity 318–19 prohibition of discriminatory internal taxation 234–5, 243 direct discrimination 240–1 genuine tax 235–6 indirect discrimination 240, 241–2 products in competition 238–40 similar products 237–8 prohibition of non-discriminatory restrictions 319– 22 Norway 7, 201 OECD (Organisation for Economic Cooperation and Development) 4, 5 official authority, exercise of 331–2 official languages 131, 133, 467 opinions 54, 133–4 orders 133–4 ordinary legislative procedure 27, 66–8 parallel behaviour 370–1 parallel imports 286–7 participatory democracy 18 pension funds 342–4 People’s Europe 447–8 pillars 8, 9 plants: protection of health and life 282–5 plea of illegality 186–7 policy initiatives 21, 23 political citizenship 460, 468 European citizens’ initiative 462–5 right to vote and stand at European and municipal elections 460–2

510



EU Law

political institutions 19 see also competences Commission see Commission Council see Council European Parliament see European Parliament powers 34–5 practical effectiveness (effet utile) 137 precautionary principle 295–6 preliminary ruling procedure division of tasks 147–9 effects of the ruling 159–61 expedited preliminary ruling procedure 158–9 jurisdiction of the CJEU 145–7 national courts or tribunals entitled to make a reference 149–50 obligation and discretion to refer 150–5 referrals refused by the CJEU 155–8 urgent preliminary ruling procedure 159 waiver of obligation to refer 153–4 price restrictions 260–1 pricing, abuse of dominant position 399 primacy 149 procedural safeguards 38–40 product market 350–3, 356 professional qualifications, mutual recognition 212, 322–3, 329 architects 323 health professions 323 legal profession 323–4 new approach to harmonisation 324–8 original legislative movement 322–4 proportionality principle 40–1, 65 public health limits to free movement rights 295, 296 EU citizens 496 public interest 217 public morality 279–80 public policy limits to free movement rights 279, 280–1 EU citizens 493–6 public security limits to free movement rights 279, 281–2 EU citizens 493–6 public service 329–31, 332 qualified majority voting (QMV) 25 quantitative restrictions 251, 252–3 exports 272–5 imports 253–72 recommendations 54 regulations 52 direct effect 87–8, 89–90 regulatory acts 69–70 reparations 121 representative democracy 17–18, 63 residence, right of 452–60, 482 economically active and inactive EU migrants 474–5

residence, right of – continued migrants’ family members 475–80 for more than three months 482–4, 485 permanent residence 484–5 for up to three months 482, 485 residual powers 34–5 rule-making powers 22 see also law-making process safety standards 217 Schengen Area 7, 8 area of freedom, security and justice 471, 472, 473 Schuman Plan 7 separation of powers 18–19 Services Directive 312 cooperation between Member States 315 free provision of services 314–15 freedom of establishment for providers 313–14 scope of application and exclusions 313 sincere cooperation 80–1, 95, 121, 149 single currency 10, 13 Single European Act 1986 8, 26, 28, 127, 277 internal market 201–2 see also harmonisation in the 21st century 206–8 common market and internal market 203–4 Completing the Internal Market (White Paper) 202 creation 204–5 economic benefits 206 first 10 years 205–6 key elements 219 social rights and benefits 485–92 social security funds 342–4 special legislative procedure 27, 66, 68–9 specialised courts 127, 135 spill-over effects 5 standards CE mark 219 national standards 211–12, 262 technical specification 213–14, 249 students 482, 483, 486, 490, 491–2 subsidiarity principle 37–40, 65 subsidiary companies 344–5 Sunday trading 263–5 supremacy of EU law 75–83, 117 application 77–83 disapplication of national law 78–80 establishment 77 EU legal instruments and documents 84–5 interpretation of national law 80–2 rationale for principle 76 reaction of national courts 83–4 state liability and 82–3 surnames 453–4 Switzerland 7, 201

Index

tariff barriers: elimination see Customs Union; free movement of goods taxation prohibition of discriminatory internal taxation 234–5, 243 direct discrimination 240–1 genuine tax 235–6 indirect discrimination 240, 241–2 products in competition 238–40 similar products 237–8 teachers 302, 329, 330 technical specifications and standards 217–18, 249 technology transfer agreements (TTA) 381, 388 teleological interpretation 136 temporal market 355, 356 Thatcher, Margaret 13 tobacco products 238, 252, 261 trade: internal market see internal market trade barriers 201, 202, 209 see also free movement of goods; internal market justification for see derogations trade marks 286, 288 transparency 65 Treaty on European Union (TEU) (Maastricht Treaty) 8, 9, 10, 13, 44, 45, 112 European citizenship 447, 448, 449 Treaty on the Functioning of the EU (TFEU) 9, 13, 44, 45 abolition of non-tariff barriers 248–52 competition rules Article 101 363, 364–90, 421–31



Treaty on the Functioning of the EU (TFEU) – continued Article 102 363, 391, 395–404, 421–31 derogations see also derogations Article 36 277–88, 289, 290–2 Article 114 288–9 enforcement under see enforcement treaty law 4, 44–7 derogations see derogations direct effect 87 Treaty of Lisbon 3, 9, 13, 45, 107, 113, 127 area of freedom, security and justice 473 Treaty of Paris 7 Treaty of Rome 8, 30, 76, 85, 118, 201, 277, 337 trilogues 63–4 Turkey 7 Ukraine 7 undertakings 338–45 vertical restraints 364, 378–9, 380–1, 387, 388, 390 see also anti-competitive agreements vitamins 283, 295, 352, 419 vote, right to 460–2 voting procedures 25–6 Western European Union (WEU) 4 wine 237–8, 239, 240, 273 workers see free movement of workers World Trade Organization (WTO) 23, 59

511

512



EU Law